Toyota Motor | Annual Report 2018

Annual

Report2018

Annual Report 2018

Fiscal year ended March 31, 2018

Table of Contents

Message from the President

Toward the Mobility Society of the Future

Initiatives for Sustainable Growth

Corporate Data

Table of Contents

The Annual Report 2018 is intended to communicate to stakeholders Toyota’s long-term strategies for enhancing its cor-

porate value and the ways that it is contributing to the sustainable development of society. More detailed information on

Toyota’s ESG-related initiatives is published in the Sustainability Data Book 2018.

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Table of Contents

Message from the President

Toward the Mobility Society of the Future

(

Published October 2018)

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Management Team

Using Connected Technologies to Expand the Freedom, Safety,

and Excitement of a Smart Mobility Society

6

Toyota’s Reports and Publications

Strengthening Our Competitiveness to Deliver Ever-Better Mobility

to Customers around the World

Eliminating CO2 Emissions from New Vehicles by 2050:

Popularizing Electriﬁed Vehicles

Making Ever-better Cars: Continuing to Make Cars That Will Be

Beloved

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0

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Annual Report 2018

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Securities Reports/SEC Filings

7 Developing Our People and Our Cars: GAZOO Racing

Sustainability Data Book 2018

18 Steady Progress toward Automated Driving

21 Partner Robots

Financial Results/Operating Results

Corporate Governance Reports

Toyota’s Business Innovation:

Organizational Framework, the Toyota Group, External

Collaboration, and TPS and Cost Reduction

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3

Environmental Report 2018

Toward Toyota Environmental Challenge 2050—

—

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4 Developing People: The True Source of Toyota’s Competitiveness

5 Message from the CFO

6 Capital Policy

27

Initiatives for Sustainable Growth

*

Toyota also publishes information on business and sustainability initiatives not included in the above reports and publications via its ofﬁcial website.

Investors https://www.toyota-global.com/investors/

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9 Corporate Philosophy

0 Corporate Governance

2 Messages from the Outside Directors

5 Toyota Environmental Challenge 2050 and 2030 Milestones

7 Employees

0 Risk Management

1 Compliance

2 Customer First and Quality First Measures

Sustainability https://www.toyota-global.com/sustainability/

Period Covered: Fiscal 2018 (April 2017 to March 2018) Some of the initiatives in ﬁscal 2019 are also included

Scope of Report: Toyota Motor Corporation (TMC)’s own initiatives and examples of those of its domestic and overseas

consolidated afﬁliates, and so on.

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The Toyota Mobility Foundation, Olympic and Paralympic

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TOYOTA Annual Report 2018

Table of Contents

Message from the President

Toward the Mobility Society of the Future

Initiatives for Sustainable Growth

Corporate Data

Message from the President

Surviving a Once-in-a-Century Period of Profound Transformation

Over the past century, an estimated 15 million horses in

the United States were replaced by the same number of

cars. We may now be facing a paradigm shift of equal, if

not greater, magnitude. Every day, I am reminded anew

that the automotive industry has truly entered a once-in-

a-century period of profound transformation.

Electriﬁcation, automation, connectivity, sharing—

technological innovation in these and other areas is

advancing rapidly. A contest with new rivals, under

new rules of competition—not to win or lose, but to

survive or perish—is now beginning.

Mobility for All

I am determined to transform Toyota from a car-

making company into a mobility company. This means

that Toyota will provide all kinds of services related to

transportation to people around the world.

Conversations like these have reafﬁrmed my belief

that mobility for all—bringing the joy and freedom of

movement to all people—is the goal that we must

work toward as an automotive company.

About two years ago, a Paralympian told me some-

thing that greatly inﬂuenced how I think about mobility.

She said, “Since I lost my future to a car accident, I

have hated cars. But today, hearing that Toyota will

sponsor the Paralympic Games, I realized that cars

could also help rebuild my future.” On another occa-

sion, Sir Philip Craven, a former President of the

International Paralympic Committee and current inde-

pendent director of Toyota, told me, “Freedom of

movement is key to enabling the physically challenged

to more actively participate in society.”

As we move forward we must also always keep in

mind the importance of creating mobility that will be

beloved. People feel a unique attachment to their

cars. As a company whose roots are in making cars,

Toyota will therefore remain committed to ensuring

that the mobility it offers will inspire love.

Our Real-world Track Record and Virtual-world Potential

At the beginning of 2018, we presented the e-Palette

Concept Vehicle in Las Vegas and the GR Super

Sport Concept in Tokyo. In character, these two mod-

els are as different as they could be: the former is

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TOYOTA Annual Report 2018

Table of Contents

Message from the President

Toward the Mobility Society of the Future

Initiatives for Sustainable Growth

Corporate Data

Message from the President

designed provide to mobility services, and the latter to

be “Fun to Drive.” Both, however, are examples of

next-generation mobility, featuring such cutting-edge

technologies as electriﬁcation, automated driving, and

connectivity. While these are still concept models, we

have begun equipping mass-market models, such as

the new Crown and Corolla Sport launched in Japan

in June, with connected technology. In doing so, we

are advancing the full-scale promotion of the spread

of connected cars. Spearheading these efforts are

Toyota companies leading the way in developing the

virtual world, including Toyota Connected and Toyota

Research Institute, the latter of which specializes in

cutting-edge research into automated driving.

Our decades-long production of such much-beloved,

long-selling models as the Crown and Corolla is part

of our real-world track record. Our consistent produc-

tion of better cars at better prices for more customers

to enjoy using the Toyota Production System is part of

our real-world track record, too. I myself have sat

behind the wheel on roads around the world with fel-

low car lovers and spent my life developing cars that

are safe, reliable, and emotionally appealing—this,

too, is part of our real-world track record. All of these

achievements have been built through the application

of a Genchi Genbutsu (onsite, hands-on experience)

approach and ongoing, real-world effort.

That Toyota boasts both such a track record in the

real world and great potential in the virtual world will,

I think, be a strength going forward.

Whether we are considering future mobility or design-

ing current mass-market models, we always start by

paying close attention to our customers and their

needs. Building the necessary customer rapport for

this takes time and sustained effort. Here, our exten-

sive history of working with our customers gives us

a unique advantage.

We will continue to leverage the strengths we have

amassed in the real world while blazing the way for-

ward in the virtual world. In doing so, we aim to create

new sources of strength for the future.

Uniting the Toyota Group to Take on the Future

Perhaps the greatest hindrance to reforms and inno-

vation at Toyota is its experience of past success.

based on past sales volumes and proﬁts and there-

fore cannot guarantee future growth. I want to make

sure that every model and every region is the absolute

top priority of someone in the Toyota Group. To place

greater priority on the businesses and regions that will

drive our future growth, we are reorganizing Toyota’s

businesses at the Group-wide level using a perspec-

tive we call “home and away.”

In the process of growing to be a full line-up car

maker with annual global sales of 10 million units, cer-

tain priorities inadvertently took hold within Toyota. For

example, developed markets came to be prioritized

over emerging markets and passenger vehicles over

commercial vehicles. These priorities, however, are

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TOYOTA Annual Report 2018

Table of Contents

Message from the President

Toward the Mobility Society of the Future

Initiatives for Sustainable Growth

Corporate Data

Message from the President

Rather than relying just on its own abilities, Toyota is

bringing together the full strength of the Group. We are

identifying the strengths that make up each company’s

The electronic components and the African market are

critical parts of the mobility society of the future. As

such, we decided to consolidate operations in these

areas at group companies that consider them home

turf, thereby raising their priority within the Group. In

this urgent time, there is no room for intra-Group com-

petition; the future of the Toyota Group depends on

enhancing its competitiveness as a united whole.

“home” turf to increase productivity and reinforce the

competitive strength of the Group as a whole.

In June, we announced the consolidation within

DENSO of the Group’s core electronic component

operations as well as an agreement to transfer all

sales and marketing operations in Africa to Toyota

Tsusho. Both these moves embody our “home and

away” approach.

Creating the Mobility Society of the Future

At the same time, I do not imagine that we can do

everything purely within the Toyota Group alone.

Having operated this long in the auto industry, working

with vast networks of companies, we deeply under-

stand the importance of collaboration. More than ever,

we will need the help of a wide range of partners as

we transform Toyota into a mobility company.

frameworks, rally like-minded partners, and leverage our

respective strengths as we continually take on the future.

I intend to personally lead the charge, ﬁghting along-

side all Toyota Group employees every day to survive

and thrive in this once-in-a-century period of profound

transformation. I ask for your continued conﬁdence

and support as we move forward.

An acquaintance of mine shared with me some

insights on the kinds of thinking and action that the

coming era will require. As this person saw it, the key

to action will not be adherence to precedent, but rath-

er speed and disregard for precedent; the leadership

needed will not be consensus building, but the ability

to rally people behind a cause.

October 2018

Akio Toyoda

President, Member of the Board of Directors

Toyota Motor Corporation

We are serious about creating the mobility society of

the future. Accordingly, we must look beyond existing

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TOYOTA Annual Report 2018

Table of Contents

Message from the President

Toward the Mobility Society of the Future

Initiatives for Sustainable Growth

Corporate Data

Toward the Mobility Society of the Future Management Team Connectivity Marketing Electriﬁcation Ever-better Cars GAZOO Racing Automated Driving Partner Robots Business Innovation Developing People Message from the CFO Capital Policy

Management Team

Executive Vice President

Koji Kobayashi

Didier Leroy

Shigeki Terashi

TPS and cost-reduction are

Toyota’s backbone. I will

pursue them on all fronts.

I want to bring Energy, Passion,

and Fighting spirit to achieve true

competitiveness.

It is time to unite globally as one

Toyota to realize freedom of

movement for all.

Executive Vice President

President

Mitsuru Kawai

Akio Toyoda

Only by applying human

wisdom and skill can we

realize the evolution of

machines—that’s why I would

like to nurture our people.

Executive Vice President

Moritaka Yoshida

I want to continue making

beloved cars that are as

exciting to watch as they

are to ride in.

Fellow

Gill A. Pratt

Executive Vice President

Shigeki Tomoyama

The key to realizing mobility

services is connected technology.

I hope that cars will continue to

amaze and inspire for the next

My personal mission is

to help Toyota gain

agility while maintaining

its strength to improve

quality of life for all

mankind.

100 years.

5

TOYOTA Annual Report 2018

Table of Contents

Message from the President

Toward the Mobility Society of the Future

Initiatives for Sustainable Growth

Corporate Data

Toward the Mobility Society of the Future Management Team Connectivity Marketing Electriﬁcation Ever-better Cars GAZOO Racing Automated Driving Partner Robots Business Innovation Developing People Message from the CFO Capital Policy

Using Connected Technologies to Expand the Freedom, Safety, and Excitement of a Smart Mobility Society

As cars rapidly developed and became commonplace

in the 20th century, reducing fossil fuel consumption,

cutting CO2 emissions to prevent global warming, and

preventing air pollution gradually became the major

social issues demanding global solutions that they are

today. In response, many counties and regions have

made plans to shift to electriﬁed vehicles, and auto-

makers are accelerating the development of such

vehicles. Indeed, the electriﬁcation of cars is an

essential part of solving these challenges.

At the same time, new social issues are also

emerging, such as increased trafﬁc congestion due

to rising population density in urban centers, shrink-

ing working populations and increased numbers of

mobility-challenged individuals in developed coun-

tries due to demographic graying, and deepening

logistics crises due to changes in consumer behavior.

In the midst of these social changes, the auto

industry is entering a once-in-a-century period of

profound transformation. Toyota provides freedom of

movement—a form of social infrastructure. As such,

we are ﬁrmly determined to contribute to solving

social issues by changing the very ways that people,

things, and information ﬂow through the world.

Based on this commitment, Toyota aims to connect

cars, people, and communities and thereby create

a smart mobility society that offers freedom of move-

ment, safety, and excitement for all.

Shigeki Tomoyama

Executive Vice President

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TOYOTA Annual Report 2018

Table of Contents

Message from the President

Toward the Mobility Society of the Future

Initiatives for Sustainable Growth

Corporate Data

Toward the Mobility Society of the Future Management Team Connectivity Marketing Electriﬁcation Ever-better Cars GAZOO Racing Automated Driving Partner Robots Business Innovation Developing People Message from the CFO Capital Policy

Using Connected Technologies to Expand the Freedom, Safety, and Excitement of a Smart Mobility Society

Our Connected Strategy for Realizing

Connected Platforms

Route History Maps to the Rescue after

Natural Disasters

Connecting cars is not only providing new value and

services to customers, but creating new modes of

use and new roles in society for cars.

To stay at the forefront of this evolution, Toyota

established the in-house Connected Company in

April 2016 and announced its Connected Strategy in

November of the same year. This strategy comprises

three arrows that we are releasing simultaneously.

Toyota’s route history maps use aggregate data on where cars

have actually been collected from Toyota vehicles equipped with

DCMs to provide trafﬁc information in a map format. The data is

constantly updated, and has been used to inform response dur-

ing and efforts after natural disasters.

Toyota plans to adopt common standards for its

worldwide DCMs by 2019, equip virtually all passen-

ger vehicles it sells in Japan and the United States

with DCMs by 2020, and steadily equip more vehi-

cles with DCMs in other major markets around the

world going forward.

Toyota’s Connected Strategy

Services for Connected Cars

1

st Arrow

2

nd Arrow

3

rd Arrow

Voice Recognition-enabled AI Virtual Agent

Our voice-recognition service has evolved into an AI virtual agent. Merely by talking to the agent, users can set the desti-

nation for the navigation system, even while the car is moving.

Connect

All Cars

Creation of

New Value

Creation of

New Mobility

Services

Connected Technologies: Creating

Services That Offer Safety and Peace of

Mind to Customers and Society

and Business

Revolution

Just press talk on the steering wheel and speak

The virtual agent analyzes your words and responds

Navigation

One such destination found.

Should I set it as your destination?

Customer

Is there a soba restaurant in

Nagano with a parking lot?

Agent

“

Connect” all cars and

Promote the use of big

data and contribute to

the good of customers

and society while revo-

lutionizing Toyota’s own

businesses

Collaborate with vari-

ous industries and IT

companies to produce

new mobility services

Turning to the second arrow, as the number of con-

nected cars on the road increases, so does the big

data they generate. Toyota is using this data to con-

tribute to the good of customers and society while

revolutionizing its own businesses.

Aggregate route history maps were made publicly

available after the Great East Japan Earthquake, and

such data has subsequently been used in evacua-

tion, response, and recovery operations following

several natural disasters.

complete the connected

platform

Weather

What’s the weather like

at my destination?

It’s sunny.

Using vehicle features

A system for cruising at a preset speed

that automatically maintains

a safe distance from other vehicles.

What’s radar cruise control?

e-Care (Driving Guidance)

•

Indicator lights turn on when an abnormality occurs (ꢀ). Vehicle data is then analyzed (ꢁ,ꢂ) and sent to an operator and

The Start of the Full-Scale Connected

Car Rollout

the customer’s dealer (ꢃ).

•

Using the navigation panel (ꢄ), customers connect to the e-Care call center (ꢅ), and an operator provides appropriate

Furthermore, by analyzing the diverse information

collected from cars on the road using big data

approaches, we will be able to utilize that information

to create and enhance services that provide safety

and peace of mind.

Making DCMs standard features also makes our

online services more convenient and easier to use for

our customers. The voice recognition enabled artiﬁ-

cial intelligence (AI) virtual agent can understand pas-

sengers’ natural speech to set the destination for the

navigation system and perform other tasks. Of

course, we also have operators standing by 24 hours

a day, 365 days a year, to provide more in-depth

response to customer requests. By offering virtual

driving guidance.

Key to the ﬁrst arrow, connecting all cars, are our

data communication modules (DCMs). In 2002,

Toyota commercialized its DCMs and launched the

G-BOOK service for Toyota vehicles (this service was

replaced by T-Connect in 2014). In 2005, DCMs

were made a standard feature in Lexus cars, and

Toyota launched the G-Link service in Japan before

expanding it to North America and China. As the ﬁrst

step toward connecting all vehicles, in June 2018,

Toyota launched sales in Japan of the new Crown

and Corolla Sport with DCMs as standard features

for all grades. This marked the start of our full-scale

roll out of connected cars.

• Operators hand over customer response to the customer’s dealer (ꢆ), which guides the customer through any necessary

vehicle servicing (ꢇ).

ꢅ Call and support

ꢄ Operator call

screen

Toyota Smart Center

Operator

Big data

ꢁ

Diagnostic data

ꢃ Data

ꢀ Indicator light

ꢆ Customer response handover

•

Vehicle data analysis

Determine likely cause

of abnormality

ꢂ

• Vehicle operability decision

Advice generation

•

ꢇ Support and guidance

Car

Dealer

(AI) and real-world (operators) service, Toyota seeks

to provide what it calls “Human Connected Service.”

7

TOYOTA Annual Report 2018

Table of Contents

Message from the President

Toward the Mobility Society of the Future

Initiatives for Sustainable Growth

Corporate Data

Toward the Mobility Society of the Future Management Team Connectivity Marketing Electriﬁcation Ever-better Cars GAZOO Racing Automated Driving Partner Robots Business Innovation Developing People Message from the CFO Capital Policy

Using Connected Technologies to Expand the Freedom, Safety, and Excitement of a Smart Mobility Society

Accelerating Cross-industry

Collaboration as a Mobility Service

Platform Provider

Under the third arrow, we are accelerating cross-

industry collaboration through the Mobility Service

Platform (MSPF). Using the MSPF, Toyota is taking

an open approach, linking with all kinds of service

providers to contribute to the creation of new mobili-

ty services.

We have already begun a range of collaborative ini-

tiatives. In May 2016, Toyota and Uber Technologies

Inc. began to consider a partnership in ride-sharing.

In 2017, we conducted a pilot program for our Smart

Key Box with U.S. car-sharing company Getaround,

Inc.; began a partnership with Grab Holdings Inc.,

the leading ride-hailing service company in Southeast

Asia; and began veriﬁcation testing of connected

taxis with the Tokyo Taxi-Hire Association. In 2018,

we are working to deepen these and other initiatives

in order to create new mobility services and acceler-

ate their commercialization.

Efforts to Deepen Collaborations in 2018

Expanded Partnership with Grab in the Area Mobility as a Service

Pilot Testing of AI-based Taxi Dispatch Support System

Aiming to Accelerate Service Development for Taxi Industry Transformation

Service

charge

In June 2018, Toyota concluded an agreement with Grab to

Toyota, JapanTaxi Co., Ltd., KDDI Corporation, and

Mobility Service

Platform (MSPF)

Vehicle

dispatch

service

Mobility Service Platform

Taxi

dispatch

App

Taxi

service

log

strengthen our existing partnership in the area of Mobility as a

Service (MaaS) in Southeast Asia and announced our decision

to invest US$1 billion (approximately ¥110 billion) in Grab.

This expansion is aimed at expanding connected services

across Southeast Asia. Speciﬁcally, we aim to achieve con-

nectivity for Grab’s rental car ﬂeet across the region and to

utilize vehicle data collected by the MSPF to roll out driving-

data-based automotive insurance as well as ﬁnancial servic-

es for Grab drivers and maintenance services currently

under development.

Accenture Japan Ltd have partnered to develop a taxi dis-

patch support system that releases demand projections for

taxi services based on a combination of data from taxi ser-

vice logs, demographic data, event information and other

inputs. Pilot testing of the system has now begun in Tokyo.

Going forward, the companies plan to steadily install

Toyota’s TransLog data-transmitting driving recorder in more

taxis, analyzing visual driving data from these devices to ﬁnd

factors that correlate with taxi demand and then working

with the taxi dispatch support system to apply the results of

this research.

Finance

Big Data

Weather

Toyota

Service

Telematics

insurance

platform

Use AI to

predict

taxi

Big Data

Car

insurance

Number of

unoccupied

taxis

Center(TBDC)

Public

transport

service

Taxi Company/

Driver

receive

on tablet

Vehicle

dispatch

data

demand

Demographic

prediction

Vehicle data/

Driving

behavior

data

availability

Vehicle

management

system

Recommended

routes to find

passengers

Dealer

Maintenance

Event

TransLog

driving

image

Maintenance

for ride sharing

TOYOTA TOYOTA TOYOTA

device device device

Driver User

8

TOYOTA Annual Report 2018

Table of Contents

Message from the President

Toward the Mobility Society of the Future

Initiatives for Sustainable Growth

Corporate Data

Toward the Mobility Society of the Future Management Team Connectivity Marketing Electriﬁcation Ever-better Cars GAZOO Racing Automated Driving Partner Robots Business Innovation Developing People Message from the CFO Capital Policy

Using Connected Technologies to Expand the Freedom, Safety, and Excitement of a Smart Mobility Society

mobility society that offers freedom of movement,

safety, and excitement for all.

More details

Guardian system, p. 18

Expanding Mobility Services in

the Near Future

Toyota is analyzing and processing the big data generat-

ed by cars to create information that is useful for cus-

tomers and a variety of connected services. We want

the car to be a seamless extension of customers’

phones and computers, a kind of personal assistant on

wheels that is able to anticipate their needs using AI.

Based on this concept, we created the e-Palette

Concept Vehicle. Using connected and automated driv-

ing technologies, the e-Palette will serve as a common

mobility platform that meets the needs of a wide range

of service providers and business applications, including

car-sharing, ride-sharing, parcel delivery, and retail.

Collaboration with Uber

We are jointly developing dedicated automated MaaS vehicles for introduction in Uber’s ridesharing service network from 2021.

Creating Automated Driving

Mobility Services

UTI/ATG

TMC/TRI/TRI-AD

Vehicle and automated

driving technology

Uber

Toyota

Ridesharing platform

and autonomous

driving technology

autonomous

Guardian

driving system System

In August 2018, Toyota and Uber announced an

agreement to expand their collaboration with the prin-

cipal aim of advancing the development of and bring-

ing to market ride-sharing services leveraging

MSPF

Software updates

Data/dispatch

Software updates

Data

Collect and

analyze data

automated driving technologies. To this end, Toyota’s

Sienna Minivan will be modiﬁed to create the initial

ﬂeet of dedicated “Autono-MaaS” (autonomous

mobility as a service) vehicles. These Autono-MaaS

vehicles will be constantly connected to the MSPF

and equipped with both Uber’s autonomous driving

system and the Toyota Guardian automated safety

support system. By using both systems together, we

aim to better monitor vehicle surroundings in real time

to realize even safer, more reliable automated driving

mobility services. Deployments of these vehicles on

the Uber ride-sharing network will begin in 2021.

In October 2018, Toyota and SoftBank Corp.

agreed to form a strategic partnership to facilitate the

creation of new mobility services. The two companies

plan to establish a joint venture company, MONET

Technologies Corporation, before the end of ﬁscal

2019. MONET will provide coordination between

Toyota’s MSPF and SoftBank’s IoT Platform. By utiliz-

ing a wide range of data related to the movement of

people and vehicles, MONET will seek to optimally

balance supply and demand in transportation and

launch new MaaS businesses capable of resolving

mobility-related social issues and creating new value.

Through MONET, we plan to roll out Autono-MaaS

businesses based on e-Palette by the mid-2020s.

Toyota is accelerating initiatives as a mobility ser-

vice platform provider, aiming to create a smart

Vehicle control interface

Vehicle control system

Guardian is a system designed to monitor, assist, and help safeguard a human driver or an autonomous driving system through the vehicle control interface.

Business image of a joint venture company with Softbank

In other words, a single e-Palette Concept Vehicle

could, depending on the time or other conditions, be

used for a range of purposes by different operators.

This is the vision of mobility service that the e-Palette

makes possible.

Furthermore, vehicle information constantly gath-

ered through the MSPF will help optimize maintenance

as well as the collection of data that can be used to

anticipate demand for goods and services. Based on

such capabilities, we are aiming to achieve the ulti-

mate in just-in-time service, in which, when a custom-

er summons an e-Palette Concept Vehicle, not only

does it set out immediately, but it is already nearby.

The technologies and expertise created in the

AI-based dispatch system being tested in collabora-

tion with JapanTaxi, KDDI, and Accenture are being

applied to enhance such demand prediction functions.

9

TOYOTA Annual Report 2018

Table of Contents

Message from the President

Toward the Mobility Society of the Future

Initiatives for Sustainable Growth

Corporate Data

Toward the Mobility Society of the Future Management Team Connectivity Marketing Electriﬁcation Ever-better Cars GAZOO Racing Automated Driving Partner Robots Business Innovation Developing People Message from the CFO Capital Policy

Strengthening Our Competitiveness to Deliver Ever-Better Mobility to Customers around the World

Toyota believes that the true value of mobility is the

freedom it enables. No matter how times change,

Toyota’s love of cars will never fade. At the same

time, our passion for mobility is not limited to cars.

Technologies for making transport easier, more

convenient, and more enjoyable for people around

the world are evolving, and the value that Toyota

provides is expanding on numerous fronts. This is

why Toyota announced its intention to transform into

a mobility company.

As Toyota works to reinforce its efforts related to

a wide range of mobility services, its approach of

seeking to be the “best in town” will be essential.

When creating new services, the business environ-

ment, particular challenges, and distributors in each

region vary greatly. Toyota must provide cars and

mobility services that are closely tailored to customer

lifestyles and regional characteristics and make itself

an indispensable presence in local communities.

Seeking to be the best in town is an approach that

reinforces competitiveness and thereby leads to

sustained growth.

In this way, Toyota’s vision is extremely clear.

To achieve this vision with emphasis on speed and

openness, Toyota is working to reform businesses

throughout the Group—and sometimes extending

beyond the Group—based on a “home and away”

perspective. “Home” refers to operations and regions

in which we can add value ourselves through Genchi

Genbutsu (onsite, hands-on experience) and in which

we have competitive advantages over our rivals.

Furthermore, under the “home and away”

approach, we will transcend the borders of the

Group’s operations. By developing working relation-

ships with other companies which have same aspira-

tions with us, we can make an enormous impact in

this time of immense change.

If it’s not fun, it’s not a car. As the value consumers

seek in cars diversiﬁes, Toyota will continue to listen

carefully to its customers, reinforce its competitive-

ness, and deliver ever-better mobility to even more

customers.

closely at Japan’s individual regions. We must

understand the desires of and problems faced by the

people living in each region and work to solve those

problems in collaboration with not just our dealers

and members of the Toyota Group, but also regional

governments and local companies. As such, in

January 2018, we reorganized the Japan Sales

Business Group. Also, we changed our domestic

sales policies, moving from a uniform approach

throughout the country to a focus on individual

regions, and are speedily carrying out said policies.

Furthermore, to strengthen our competitiveness

and to create and provide new mobility services, in

addition to ongoing business reinforcement efforts,

we established Toyota Mobility Service Co., Ltd. in

April 2018. This new subsidiary will develop and

provide solution services for corporate customers,

connected services using communications devices

in cars, car sharing, and other new services.

Tokyo, in particular, is the earliest adopter of mobil-

ity service, seeing a shift from car ownership to car

usage. Targeting the Tokyo region, we plan to inte-

grate Tokyo Toyota Motor Co., Ltd., Tokyo Toyopet

Motor Sales Co., Ltd., Toyota Tokyo Corolla Co.,

Ltd., and Netz Toyota Tokyo Co., Ltd., to form a new

company in 2019. By efﬁciently developing its dealer

network and by concentrating its resources, Toyota

will continue working to be the best in town.

Shifting to a Region-based Approach

in Japan, Toyota’s Home Market

Conditions in Japan’s automotive market are expect-

ed to become more difﬁcult than ever. The market is

contracting as a result of such social issues as the

declining and graying population, urbanization, and

rural depopulation. At the same time, the market is

changing, with increased use of IT, AI, automated

driving, and other technological innovations, as well

as the emergence of new rivals.

To adapt to future market changes, Toyota launched

in 2016 the J-ReBORN Plan under which it has been

working to transform the domestic car sales business.

Until now, Toyota’s growth in the Japanese market

has been based on sales efforts that were focused

on channels and uniformly implemented nationwide.

Going forward, however, we will need to look more

“Away,” meanwhile, refers to operations and

regions in which we will work with other companies

that have more advantages than we do in terms of

expertise. By reexamining our businesses and effec-

tively allocating management resources to “home”

and “away” companies, we can increase productivity

and make the entire Toyota Group more competitive.

And, above all, Toyota believes that applying Genchi

Genbutsu in their work at more specialized compa-

nies will help our human resources grow and develop.

Changes in Japan’s Market Environment

• Declining, graying population

Changes in the Automotive Business

• Increased use of IT, AI, automated driving, and other technological

Didier Leroy

Executive Vice President,

Member of the Board of Directors

•

Urbanization, rural depopulation

Further market contraction

innovations

• Emergence of new rivals

•

Expansion of car sharing (non-ownership)

The speed of market change is an order of magnitude greater than ever before

J-ReBORN Plan

With an urgency unmatched since our founding, we are pushing forward ambitiously alongside

dealers to truly thrive in this period of immense change, for the sake of our future customers’

peace of mind and for the sake of our sustainable future

1

0

TOYOTA Annual Report 2018

Table of Contents

Message from the President

Toward the Mobility Society of the Future

Initiatives for Sustainable Growth

Corporate Data

Toward the Mobility Society of the Future Management Team Connectivity Marketing Electriﬁcation Ever-better Cars GAZOO Racing Automated Driving Partner Robots Business Innovation Developing People Message from the CFO Capital Policy

Strengthening Our Competitiveness to Deliver Ever-Better Mobility to Customers around the World

Reinforcing Group Competitiveness—Collaboration with Toyota Tsusho

Beginning with the export of the Land Cruiser and

other models to Africa in the 1950s, Toyota has

worked closely with customers in sub-Saharan coun-

The “One Toyota” Initiative, Focused on Sustainable Growth—From Visitor to Neighbor

tries and throughout the continent. Today, Toyota

South Africa Motors (Pty) Ltd. serves as a manufactur-

ing and export base and boasts South Africa’s highest

vehicle production volume.

In April 2014, Toyota announced the “One Toyota” ini-

tiative aimed at consolidating its regional head ofﬁce

functions in North America. The July 2017 grand

opening of Toyota’s new North American headquarters

in Plano, Texas, was the ﬁrst new opening under the

initiative. Previously, Toyota’s North American functions

were in four locations—California, Kentucky, Michigan,

and New York. Now, the sales management, ﬁnancial

services, external relations, public relations, and

research functions have been consolidated in Plano,

while purchasing and production engineering have

been consolidated at a Technical Center in Ann Arbor,

Michigan, and a Production Engineering and

Manufacturing Center in Georgetown, Kentucky, respec-

tively. By strengthening cross-functional coordination,

Toyota has created a framework for responding to the

needs of North American customers faster in order to

make ever-better cars that exceed expectations.

Toyota began operations in the United States 61

years ago, in October 1957, with just a single dealer.

Today, Toyota’s businesses are deeply rooted in the

United States socially, economically, and culturally;

Toyota’s direct investments in the country to date total

approximately US$25 billion, and the Company oper-

ates 10 manufacturing assembly facilities, boasts

almost 1,500 dealers, and employs approximately

137,000 people nationwide (including direct and indi-

rect workers and dealer employees).

The new North American headquarters in Plano

sends the clear message that Toyota is here to stay

and contribute to the community.

With the opening of the new headquarters, approxi-

mately 3,000 employees have relocated from the four

previous sites, and Toyota has made about 1,000 new

hires. Toyota has also committed to investing approxi-

mately US$10 billion in the United States over ﬁve

years. These funds are being put toward such endeav-

ors as the construction of the new headquarters and

reinforcing the competitiveness of existing plants.

Going forward, Toyota will continue to step up its com-

petitive strength as “One Toyota” in North America and

contribute as a neighbor, aiming to be the best in town.

Africa is sometimes called the “last frontier”—as this

appellation suggests, it is a market with enormous

potential. Toyota Group company Toyota Tsusho

Corporation (TTC) has signiﬁcant business strength on

the continent, with a dedicated Africa Division and

over 10,000 Group employees in the region.

Toyota is now advancing preparations to transfer all

its sales and marketing operations in African markets

to TTC in January 2019. This move embodies our

aspiration to be the best in town in the region by con-

centrating operations at TTC, a Group company that

has a “home” in Africa.

To facilitate greater coordination, Toyota has select-

ed a former TTC executive who has a wealth of expe-

rience in local operations as its CEO of Africa region.

By reinforcing human resource development at both

companies, we will further accelerate businesses

in Africa.

Learning from the “Let’s Do It” Spirit—Collaboration with Suzuki

Toyota has learned a great deal over the years through

open collaboration with competing manufacturers.

Our partnership with Suzuki is one such effort. While

Toyota has built strong business foundations in

Southeast Asia, it has yet to effectively exercise its

strength in other emerging nations, such as India,

where Suzuki has utilized its famous “Let’s Do It” spirit

to the fullest and built a solid position.

companies’ product

lineups and encour-

aging competition in

the Indian automotive

market. In May 2018,

we agreed to begin

discussions related to

three joint projects in

TMA

(

External relations,

public relations,

research)

New York,

New York

TMS

(

Sales HQ)

TEMA

In February 2017, Toyota and Suzuki concluded a

memorandum regarding a business partnership.

Moving toward concrete collaboration, in November

such areas as car

New Headquarters (R&D, manufacturing HQ)

production and powertrain development assistance.

Toyota will continue to learn from Suzuki’s “Let’s Do

It” spirit, working as a member of Indian industry to

realize a freer, more enjoyable future mobility society.

Together, we are advancing toward a day when “Made

in India” cars will be widely loved not only in India, but

also in Africa and other regions around the world.

Erlanger, Kentucky

TMCC

(

Financial &

2017, the two companies agreed to discuss setting

insurance services)

Torrance, California

Plano, Texas

TMMK

(Production)

up a cooperative structure for introducing electric

vehicles in the Indian market around 2020. Then, in

March 2018, Toyota and Suzuki concluded a basic

agreement to supply one another with hybrid and

other vehicles, with the aim of bolstering both

Georgetown, Kentucky

1

TOYOTA Annual Report 2018

Table of Contents

Message from the President

Toward the Mobility Society of the Future

Initiatives for Sustainable Growth

Corporate Data

Toward the Mobility Society of the Future Management Team Connectivity Marketing Electriﬁcation Ever-better Cars GAZOO Racing Automated Driving Partner Robots Business Innovation Developing People Message from the CFO Capital Policy

Eliminating CO2 Emissions from New Vehicles by 2050: Popularizing Electriﬁed Vehicles

In December 2017, Toyota announced its plans to sell

more than 5.5 million electriﬁed vehicles per year

globally by 2030. As part of the Toyota Environmental

Challenge 2050, launched in 2015 to contribute to

the realization of a sustainable society, we set for our-

globe. We plan to introduce more than 10 BEV mod-

els in the ﬁrst half of the decade.

A New Push to Popularize Electriﬁed

Vehicles by 2030

Next, while expanding our lineup of dedicated

electriﬁed models, such as the Prius and Mirai, we

will make electriﬁed versions available for other mod-

els, as well, aiming to have no models lacking an

electriﬁed option by around 2025.

Basing calculations on our current global sales, by

2030 we aim for annual sales of more than 5.5 million

electriﬁed vehicles, including hybrid electric vehicles

(HEVs), plug-in hybrid vehicles (PHEVs), BEVs, and

FCEVs. Of this total, we are aiming for more than 1 mil-

lion to be BEVs, FCEVs, or other zero-emission vehicles.

In the 20 years since launching the Prius in 1997,

Toyota has sold more than 12 million electriﬁed vehi-

selves the New Vehicle Zero CO

under which we aim to reduce Toyota’s global aver-

age new vehicle CO emissions in 2050 by 90% com-

2

Emissions Challenge,

Toyota aims to sustainably grow while steadily solidi-

fying its business base through the three values of

safety and peace of mind, Waku-doki (excitement

and exhilaration that wows you), and environmental

sustainability. By doing so, we hope to contribute to

the creation of a sustainable mobility society and

bring smiles to our customers’ faces.

Electriﬁcation will be indispensable to reducing

vehicle CO2 emissions and thus addressing global

warming, a challenge facing by the entire planet.

Toyota is steadily advancing efforts in this area under

the Toyota Environmental Challenge 2050 estab-

lished in October 2015.

In particular, to popularize electriﬁed vehicles, Toyota

is aiming for at least 50% of all the vehicles it sells

globally in 2030 to be electriﬁed, and, of those, for

more than 10% to be battery electric vehicles (BEVs)

or fuel cell electric vehicles (FCEVs). To this end, we

have set the following three intermediary targets.

First, from 2020 onward, we will advance the full-

scale roll-out of BEVs. Speciﬁcally, we will launch

mass-market BEVs developed by Toyota for the

Chinese market in 2020, then expand sales to Japan,

India, the United States, Europe, and around the

2

pared with the 2010 level. This new initiative to

popularize electriﬁed vehicles is one of our medium-

to long-term measures to achieve this target.

Toyota believes that eco-friendly vehicles can best

help protect the environment if they are in widespread

use. To consistently provide products that meet

customer expectations and needs as a mass manu-

facturer, a diverse lineup of electriﬁed vehicles is

essential. At the same time, Toyota is advancing

initiatives on all fronts, including technological innova-

tion as well as social infrastructure development tai-

lored to the energy and usage conditions of speciﬁc

countries and regions.

cles around the world, helping to cut CO2 emissions

by more than 94 million tons.* Today, Toyota offers

36 electriﬁed models in more than 90 countries and

regions, maintains an electriﬁed vehicle development

staff numbering 4,500 within the Company alone,

and sells more than 1.5 million of these vehicles each

year. These ﬁgures are a testament to the trust that

customers have in these vehicles’ quality, durability,

and reliability; customer support for this type of vehi-

cle over the years; the vast technological expertise

built up by the Group; and Toyota’s successful estab-

lishment of electriﬁed vehicle mass production tech-

nologies in Japan and around the world. The

Toyota regards the current once-in-a-century

transformation of the automobile industry—including

the promotion of electriﬁcation—as an unparalleled

opportunity to deliver new value to customers and

expand its business.

electriﬁed vehicle technologies and expertise it has

Toyota’s Major Recent Initiatives in Electriﬁcation

Vehicle Electriﬁcation Milestones

Announced a joint next-generation convenience store project with Seven-Eleven

Japan to begin in autumn 2019, aimed at greatly reducing CO emissions

June 2018

May 2018

2

030

Electrified vehicles

50%

Move to expand fuel cell stacks and high-pressure hydrogen tank production

equipment, aiming to increase sales of FCEVs from around 2020

HEVs

>

Shigeki Terashi

Launched the ﬁrst Aichi Low-carbon Hydrogen Supply Chain project, aimed at realiz-

ing a hydrogen-powered society in cooperation with the Aichi prefectural government,

local companies, municipal authorities and other partners

BEV/FCEVs

>10%

April 2018

Executive Vice President,

Member of the Board of Directors

2050

Zero CO

Emissions

Challenge

Around 2025

Electrified

versions available

for all models

Announced that sales of electriﬁed vehicles in 2017 reached an all-time high, surpass-

ing 1.52 million and achieving one of the Toyota Environmental Challenge 2050

targets three years early

2

Engine-powered vehicles

February 2018

January 2018

2

020

Presented the e-Palette Concept Vehicle, a BEV for mobility services, at CES

Start of

full-scale

BEV rollout

PHEVs

December 2017 Announced an initiative to popularize electriﬁed vehicles from 2020 to 2030

1997

World’s first

mass-production

HEV

2

014

Began a feasibility study with Panasonic Corporation of a joint automotive prismatic

battery business

FCEVs

December 2017

FCEVs

BEVs

Established EV C.A. Spirit Corporation with Mazda and DENSO to jointly develop

technologies for electric vehicles

September 2017

1990

2000

2010

2020

2030

2040

2050

1

2

TOYOTA Annual Report 2018

Table of Contents

Message from the President

Toward the Mobility Society of the Future

Initiatives for Sustainable Growth

Corporate Data

Toward the Mobility Society of the Future Management Team Connectivity Marketing Electriﬁcation Ever-better Cars GAZOO Racing Automated Driving Partner Robots Business Innovation Developing People Message from the CFO Capital Policy

Eliminating CO2 Emissions from New Vehicles by 2050: Popularizing Electriﬁed Vehicles

accumulated over the decades are a vital strength of

Toyota and will provide a solid foundation for the

popularization of electriﬁed vehicles going forward.

develop applications for our fuel cell technologies in

a range of industrial ﬁelds.

In particular, a key factor in the popularization of

electriﬁed vehicles is batteries. For example, the bat-

teries used in BEVs currently on the market already

have capacities several tens of times as large as

those used in HEVs, yet that capacity needs to be

signiﬁcantly improved if their cruising range is to be

on par with that of HEVs.

To address this difﬁculty, in December 2017,

Toyota began a feasibility study with Panasonic

Corporation of a joint automotive prismatic battery

business. Furthermore, Toyota is developing solid-

state batteries, aiming to commercialize the technol-

ogy by the early 2020s. Compared with conventional

batteries, solid-state batteries are expected to be

smaller and safer while achieving dramatically

improved performance.

To realize the improvements in performance, cost,

and supply capacity necessary to meet its targets for

2030, Toyota will invest approximately 1.5 trillion yen,

bolstering R&D and capital expenditure related to

batteries. By doing so, we will accelerate efforts to

transform the electriﬁed vehicle business to sell more

than 5.5 million electriﬁed vehicles in 2030.

Finally, looking at social infrastructure, we must

approach the electriﬁcation of mobility and problems

related to resources and energy comprehensively.

Without the establishment of systems for reusing and

recycling materials, the ongoing popularization of

electriﬁed vehicles runs the risk of driving up rare

metal prices and increasing industrial waste. Toyota

has for some time been involved in the reuse and

recycling of HEV batteries. For example, these bat-

teries are being used in ﬁxed electricity storage sys-

tems, helping to realize stable energy circulation at

power plants and factories.

From an energy standpoint, Toyota aims to help

create a society that utilizes both electricity and

hydrogen. We are advancing a variety of initiatives,

including pilot projects aimed at utilizing renewable

energy and building a low-carbon society. In the long

run, we envision a society that is built on diverse

energy sources and that effectively utilizes electricity

and hydrogen. To achieve this vision, we are working

with the entire Group as well as outside corporate,

government, and other partners to help develop a

sustainable mobility society.

Toyota is currently the electriﬁed vehicle market leader;

approximately one in two such vehicles sold around the

world is a Toyota. Going forward, Toyota will seek to

maintain this lead by advancing initiatives related to

products and the technologies and social infrastructure

that support them. Through these initiatives to popular-

ize electriﬁed vehicles, together with initiatives related to

connected technologies and automated driving leverag-

ing AI, we will continue to ambitiously strive toward the

realization of the mobility society of the future.

More details

Hydrogen-related initiatives, p. 14

*

As of April 30, 2018

In addition, Toyota believes that HEVs, the trailblaz-

ers of the electriﬁed vehicle ﬁeld, still have a large role

to play. In addition to further enhancing Toyota’s

existing hybrid technologies in terms of fuel economy,

cost, and driving performance, we will develop a

range of new HEV types. These may include, for

example, sports models with superb acceleration;

high-power models capable of towing camping trail-

ers; one-motor, mild hybrid or other types of afford-

able hybrids for emerging markets; or models using

multi-stage hybrid systems like that in the Lexus LS.

Comprehensive Initiatives Related to

Products, Technologies, and

Social Infrastructure

For Toyota to continue to meet diverse customer

needs, it will need to implement robust initiatives cov-

ering products, technologies, and social infrastructure.

In terms of products, as society undergoes major

changes and the needs of customers and markets

rapidly diversify, applying technologies in ways that

break with convention to diversify our electriﬁed vehi-

cles will be key their popularization.

For example, in BEVs, in addition to mini-, mid-

size, and full-size vehicles, we will expand to buses

and trucks and work as a Group to create products

for a wide range of applications, including commer-

cial and sharing services.

More details

Powertrains for hybrid vehicle, p. 14

Turning to technologies, Toyota has established a

global mass production platform that boasts an

annual capacity of more than 1.5 million HEVs. This

platform can readily be used to produce other types

of electriﬁed vehicles, such as BEVs and FCEVs.

However, a far vaster and more advanced production

network than any that now exists will be needed for

the more than 5.5 million electriﬁed vehicles a year

that Toyota is targeting.

As for FCEVs, we will expand our lineups of pas-

senger and commercial vehicles in the 2020s.

Furthermore, working with Group companies, we will

Core Technologies Shared Across Electriﬁed Vehicles

Diversiﬁed Electriﬁed Vehicles

Toyota’s Battery Development

Motor, Battery, Inverter

FCEVs

1925 Public call for Sakichi Battery

HEV/

PHEVs

=

Core technology across

electrified vehicles

Applied to all electrified vehicles

Bus

1

939 Established Battery Research Laboratory

Engine

Fuel cell

Passenger cars

1997 1st-gen. Prius launched (nickel-metal hydride battery)

2003 Lithium-ion batteries

BEVs

HEVs

PHEVs

BEVs

Electric

motor

HEV

FCEV (Bus)

Full-size truck

Small home-delivery vehicles

Charging

Short-distance use

2020s Solid-state

batteries

Battery

Sakichi Toyoda

BEV

FCEV

Delivery truck

Charging

PHEV

Ideal energy storage device

High energy density, retains charge, fast charging,

low resistance, easy to manufacture, highly durable

Hydrogen tank

Metal-air batteries

Inverter

Personal mobility

H

2

Travel distance

(

PCU)

H

2

FCEVs

O2

Since its founding, Toyota has recognized the importance of and advanced the development of batteries

Diversification of HEVs, PHEVs, BEVs, and FCEVs becoming more important

1

3

TOYOTA Annual Report 2018

Table of Contents

Message from the President

Toward the Mobility Society of the Future

Initiatives for Sustainable Growth

Corporate Data

Toward the Mobility Society of the Future Management Team Connectivity Marketing Electriﬁcation Ever-better Cars GAZOO Racing Automated Driving Partner Robots Business Innovation Developing People Message from the CFO Capital Policy

Eliminating CO2 Emissions from New Vehicles by 2050: Popularizing Electriﬁed Vehicles

To realize a sustainable society, it will be impor-

tant to effectively use electricity and hydrogen

together in order to fully leverage CO2-free renew-

and more compact, creating vehicles with lower

Aiming for a Decarbonized Society in 2050:

Leveraging Hydrogen Energy

Innovating Powertrains to Enhance both Driving and

Environmental Performance

centers of gravity, utilizing high-speed combustion

in engines, and employing more gears to make

transmissions more efﬁcient.

Toyota regards hydrogen as a high-potential future

energy source and believes that FCEVs, with their

high capacity to contribute to society, are the ulti-

mate eco-cars. Toyota’s development of FCEVs

began even before the release of the Prius, back in

992. We released the Mirai in Japan in December

014 and in the United States and Europe the fol-

lowing autumn; currently, we offer the Mirai in a total

of eleven countries. In March 2018, Toyota

launched the Sora production model FC bus. We

expect to introduce over 100 of these buses, mainly

within the Tokyo metropolitan area, by the time of

the 2020 Tokyo Olympics and Paralympics.

To popularize FCEVs, we are aiming for annual

global sales of the Mirai and other FCEVs of over

Toyota’s environmental technology strategy is based

on the three pillars of saving energy, using diverse

fuels, and the understanding that eco-friendly vehi-

cles can best help protect the environment if they

are in widespread use. We expect that 90% of the

vehicles we sell in 2030 will have conventional

engines (as gasoline-powered vehicles, HEVs or

PHEVs). As such, to reduce CO2 emissions, the

continued improvement of powertrain fuel economy

is vital.

Accordingly, Toyota is working to achieve both

excellent driving performance and excellent environ-

mental performance by remaking and signiﬁcantly

evolving its engines, transmissions, and hybrid tech-

nology through Toyota New Global Architecture

(TNGA), its program of structural innovation aimed

at making ever-better cars. Through development

under TNGA, we are thoroughly examining all

aspects of basic performance for opportunities for

improvement, including making components lighter

able energy sources. Hydrogen allows for the stor-

age and efﬁcient use of electricity derived from

ﬂuctuating natural energy sources. Furthermore,

hydrogen can be used as a direct energy source in

FCEVs and industrial applications. While hydrogen

will thus be highly useful going forward, realizing a

hydrogen-powered society will require a great deal

of time and investment. In addition, cooperation

with a diverse range of stakeholders will be indis-

pensable. Toyota performs a leading role in the

Hydrogen Council, a global initiative promoting

a united vision and long-term goals for the transition

to new energy using hydrogen, as well as Japan H2

Mobility, LLC, which aims to develop a network of

hydrogen stations across Japan. Through these and

other efforts, we are proactively contributing to the

creation of a hydrogen-powered society.

Toyota will continue to use TNGA-based modular

development to rapidly bring these powertrains to

numerous models. We plan to introduce these new

powertrains in 37 variations of 19 models by 2021.*

Plans call for expanding sales of such vehicles to

approximately 80% of all new vehicles sold in 2023

on a non-consolidated basis (in Japan, the United

States, Europe and China). We estimate that the

increased fuel economy of the new TNGA power-

1

2

trains alone will reduce the CO2 emissions from the

cars sold by Toyota on a non-consolidated basis in

2023 by at least 18%.

* Variations include FF vs. FR layouts, passenger vs. commercial

applications, conventional vs. hybrid vehicles, and differences in

torque capacity

3

0,000 units from around 2020. Going forward, we

plan to expand production facilities for core FCEV

components, namely fuel cell stacks and the high-

pressure hydrogen fuel tanks to meet growing

demand for FCEVs.

Toward Realizing a Decarbonized Society in 2050:

Use of Hydrogen Energy (Sustainability Data Book 2018,

WEB

pp. 100-102)

Energy Use in a Sustainable Mobility Society

90% of Toyota Vehicles Sold in 2030 Will Have Conventional Engines

Introduction of TNGA Powertrains (as of February 2018)

THS-II

(2.5L)

Direct

Shift-CVT

6MT

THS-II

(2.0L)

Using electricity and hydrogen for a society built on diversified energy

HEVs

2

030

Electrified vehicles

50%

Multi-stage

THS-II

1.8L)

Direct

Shift-8AT

(

BEVs/PHEVs

>

Power storage facilities

BEV/FCEVs

>10%

Wind power

Thermal power

Industrial use

Renewable

energy

Electricity grid

Fossil fuels

TNGA

powertrains

17 variations of 9 engines

10 variations of 4 transmissions

0 variations of 6 hybrid systems

City/home

Electrolysis

Solar power

LNG

OIL

Hydrogen

–

Electricity

Hybrid cars

City/home

Vehicles with

conventional

engines

1

conversion

PHEVs

Power-generator unit

Biomass

9

0%

H

2

Oil refinery/chemical plant

Energy flow

Hydrogen grid

Hydrogen tank

High-capacity,

long-term storage

Chemical plant

FCEV cars

and buses

FCEVs

Sewage treatment

H₂

Direct

Shift-10AT

City/home

Automotive fuel

Electricity

Hydrogen

Fossil fuels

3.5-liter

twin-turbo

Dynamic Force

Engine (2.5L)

Dynamic Force

Engine (2.0L)

BEVs

2010

2020

2030

2050

1

4

TOYOTA Annual Report 2018

Table of Contents

Message from the President

Toward the Mobility Society of the Future

Initiatives for Sustainable Growth

Corporate Data

Toward the Mobility Society of the Future Management Team Connectivity Marketing Electriﬁcation Ever-better Cars GAZOO Racing Automated Driving Partner Robots Business Innovation Developing People Message from the CFO Capital Policy

Making Ever-better Cars: Continuing to Make Cars That Will Be Beloved

The automotive industry is in the midst of a period of

profound change. For Toyota to continue to grow

going forward, it must, above all, make its cars even

more appealing and continue to deliver cars that will

enhance users’ lives and be beloved by customers. As

information, intelligence, and electriﬁcation technolo-

gies develop, the nature of mobility will surely change,

but Toyota will remain committed to ensuring that its

cars will be beloved as it makes ever-better cars that

are more convenient, safer, and more eco-friendly.

To this end, we are implementing structural innova-

tion across our global car making business. Namely,

we have launched Toyota New Global Architecture

Since its founding, Toyota has made cars in line

with its Customer First policy. Through these efforts,

it has developed unique methods and values, such

as the Toyota Production System (TPS) and Kaizen,

which have been passed down as wellsprings of

competitive strength. By actively applying these

strengths at development and production preparation

sites going forward, we will endeavor to make ever-

better cars that surpass customer expectations.

advancing total optimization by pursuing smart shar-

ing, thereby improving efﬁciency and reducing costs.

These efforts are greatly increasing our potential to

create cars that will be beloved by customers.

Building on the foundation provided by TNGA, the

in-house companies consider each region’s market

needs and consumer preferences to craft distinctive,

appealing cars that customers will love.

Toyota began its TNGA initiatives with the develop-

ment of the fourth-generation Prius (launched in

Japan in December 2015) and then applied them to

create two other mid-size models, the C-HR and

Prius PHV. We next applied TNGA to full-sized mod-

els, announcing the Camry and the Lexus LC and LS

in 2017 and the Crown and Corolla Sport in 2018.

While these cars share TNGA components, the char-

acter of each is completely distinct, as is immediately

apparent in terms of design and ride. The in-house

companies have created these distinctive cars to suit

different customer preferences, so that every cus-

tomer can ﬁnd a car they will love. Going forward, we

will expand TNGA to compact-class cars, as well, to

serve even more customers.

TNGA So Far

(TNGA), under which we are changing our cars from

the basic architecture outward to greatly enhance

basic performance and product appeal. Building on

this foundation, we have also adopted a product-

based in-house company system aimed at creating

even more distinctive ﬁnished cars. We will continue

to reinforce both TNGA and the product-based

in-house company system, aiming to more quickly

respond to customer demand.

TNGA is a program of structural innovation aimed at

making ever-better cars, starting by changing their

basic architecture. Through TNGA, we are completely

remaking the basic frames of our cars while dramatically

enhancing design to catch our customers’ eyes and

capture their hearts and improving basic perfor-

mance to provide a driving experience that custom-

ers will want to never end. At the same time, we are

Moritaka Yoshida

Executive Vice President

Making Ever-better Cars: Toyota’s Approach and Structure

TNGA

TNGA Product Roll-out

Compact

class

In-house Company System

Structure

Work Process

Individual

Aspects of

cars tailored

to customer

tastes

Car creation focused on each car type

Decision making by in-house company presidents

Lexus

premium class)

optimization

Making

(

distinctive cars

Full-size

class

Lexus LC

Lexus LS

Crown

Planning

Design

One team

uniting four

functions

• Faster decision making

Total optimization

Making better

products and

practicing smart

sharing

Total

optimization

through

standardiza-

tion

Execution

Mid-size

class

Camry

C-HR

•

Streamlined planning/

development

Production

engineering

• Reduced need to

re-do work

Manufacturing

Corolla

Sport

Prius PHV

1

5

TOYOTA Annual Report 2018

Table of Contents

Message from the President

Toward the Mobility Society of the Future

Initiatives for Sustainable Growth

Corporate Data

Toward the Mobility Society of the Future Management Team Connectivity Marketing Electriﬁcation Ever-better Cars GAZOO Racing Automated Driving Partner Robots Business Innovation Developing People Message from the CFO Capital Policy

Making Ever-better Cars: Continuing to Make Cars That Will Be Beloved

Until now, we have developed such different cars

separately. By implementing TNGA across the

Company, however, we are able to more quickly

introduce new models. And, by reinvesting the

resources saved through these initiatives in further

enhancing quality and product appeal, we are accel-

erating a virtuous cycle that enables us to deliver

ever-better cars even faster.

push forward with further cost reductions.

regional characteristics, and ﬁnally produce cars that

balance product appeal, speciﬁcations, and price.

As a model project, we have created a team con-

sisting mainly of young employees from design and

performance evaluation and production preparation

units, which develop vehicles, to implement the TPS

approach. Each day, the team members meet to

identify overburden and waste in the day’s work,

come up with ideas for improvement, and immedi-

ately put these ideas into action. This initiative has

only just begun, but already the team members more

deeply understand one another’s work, have identi-

ﬁed redundancies and other waste in the operations

of their units, and are working as one to ﬁnd opportu-

nities for improvement.

I think that introducing the TPS in development

units will not only help shorten development lead

times and reduce costs, but will also contribute

greatly to human resource development. We will use

these initiatives to help make ever-better cars that will

be beloved by customers.

For example, we are taking on new initiatives to

create individual project-oriented organizations that

cover everything from planning to manufacturing and

promoting quick judgment and quick decisions to

make ever-better cars cheaper, more quickly, and

more easily. At the same time, we are utilizing these

cross-functional organizations as channels to

advance human resource development and imple-

ment work style reforms.

Furthermore, through alliances with other compa-

nies and through our subsidiary Daihatsu Motor Co.,

Ltd., we are learning more efﬁcient development

methods and steadfastly applying Kaizen to make

ever-better cars that exceed customer expectations.

We also need mechanisms to ensure, from start to

ﬁnish, that we are making cars that are appealing

from the customer’s perspective. We are doing away

with the antiquated idea that it is only natural for quali-

ty products to be expensive and reforming our devel-

opment process to plan products from the customer’s

viewpoint, develop them to suit customer needs and

Bringing the Toyota Production System

to Development

The TPS is a system for completely eliminating over-

burden and waste to improve productivity within ﬂow

of things and people. Until now, the TPS has been

applied mainly at production sites, where it has been

reﬁned and developed through many years of use.

Now, we are introducing the principles of the TPS at

development and manufacturing technology units.

One of the motivations behind this move is our strong

desire to develop our human resources in these units

by having them apply Genchi Genbutsu (onsite,

hands-on experience) to think about the cars they are

working on and the entire process from development

to production preparation. By doing so, we hope that

they will learn to completely eliminate waste.

The Next Evolution of Making

Ever-better Cars

While we have thus made progress, certain areas

that still need work have also come to our attention.

As a result of our focus on improving performance

and product appeal, we have heard from some cus-

tomers that, while they can tell that our cars have

gotten better, they ﬁnd the prices rather high. To

ensure that we continue to provide cars that will be

irreplaceable and beloved by our customers, we will

Making Ever-better Cars That Will Be Beloved

Application of the TPS

New initiatives

Existing initiatives

What Customers

Love about Cars

Making Ever-better Cars

Planning and development in line with customer needs

and regional characteristics

Production

preparation

Planning

Development

Production

Customers

Balance of product appeal, specifications, and price

Fun of

driving

Connected cars

Cars that

will be beloved

by each individual

customer

Logistics

Comfort

Safety

Luxury vehicles

Welcab

Introducing the TPS principles

(Lexus)

Eco-cars

Suppliers

Advanced safety

New concept

Joy of

ownership

(automated

driving)

Lifestyle

enhancement

cars

Social contribution

(

commercial

vehicles)

Identifying and eliminating waste

1

6

TOYOTA Annual Report 2018

Table of Contents

Message from the President

Toward the Mobility Society of the Future

Initiatives for Sustainable Growth

Corporate Data

Toward the Mobility Society of the Future Management Team Connectivity Marketing Electriﬁcation Ever-better Cars GAZOO Racing Automated Driving Partner Robots Business Innovation Developing People Message from the CFO Capital Policy

Developing Our People and Our Cars: GAZOO Racing

“

In an ideal world, machines would work just as we intend them

to. But when we actually try to run them, unforeseen results fre-

quently prove our human reasoning exceedingly shallow. And

there is no better way to test our cars and discover how to

improve them than auto racing.

Just as Olympic athletes give every last drop of effort to test

their strength, in racing, automobiles are pushed to the limit—

a point that is contested through progressive improvements and

lights up the hearts of motor racing fans.”

Kiichiro Toyoda,

Toyota’s founder

President Toyoda (left), the late master driver Hiromu Naruse

Through motor sports, Toyota aims to bring excite-

ment and joy to customers, fans, and communities

around the world. Above all, developing our people

and our cars in order to make and deliver ever-better

cars is the unwavering core of Toyota motor sports.

Toyota also competes in the FIA World Endurance

Championship (WEC), comprising the 24 Hours of Le

Mans and other endurance races around the world.

Toyota ﬁrst entered the 24 Hours of Le Mans in 1985

and took its ﬁrst win in 2018, its 20th time compet-

ing. Toyota’s two cars started the race at the very

front of the pack and held the top two positions all

the way to the end. This marks the ﬁrst time that a

Japanese driver in a Japanese car has won Le Mans.

In 2016, the Toyota team suffered a mechanical fail-

ure just three minutes before the end of the race. In

2017, they ﬁnished just 8th overall. Going into 2018,

they completely revamped their approach. The devel-

opment goal was changed from optimal lap time to

ensuring that the car could get back to the pit no mat-

ter what problems arose—in other words, to survive

no matter what. The team created a list of likely prob-

lems, and then made them happen on test courses,

practicing recovering using the car’s remaining func-

tions over and over. Doing so enabled the drivers,

mechanics and engineers to push further than ever

before and gave rise to Kaizen (improvement) based

on Genchi Genbutsu (onsite, hands-on experience).

Lastly, Toyota also competes in the 24 Hours of

Nürburgring endurance race. This race takes place

on the Nürburgring, one of the world’s most difﬁcult

courses. Laid out to resemble ordinary European

country roads, the Nürburgring has an exceptionally

long circuit of 25 km, narrow track widths, a maxi-

mum altitude difference of around 300 m, and more

than 170 corners. Toyota’s team in this 24-hour

endurance race comprises mainly mechanics and

engineers who are regular Toyota employees. In

Evolving Ever-better Cars Using

“

I don’t want to be preached to about cars by some-

Development Methods from Racing

one who doesn’t even know the basics of driving. We

test drivers put our lives on the line to make better

cars. You’ve got to understand that.” This frank

remark in 2002 was the start of a teacher-pupil rela-

tionship between the late master driver Hiromu

Naruse and Akio Toyoda. Wanting to be able to cor-

rectly judge cars, Toyoda joined Naruse’s team and

commenced training. In 2007, at Naruse’s sugges-

tion, Toyota decided to enter the 24 Hours of

One of Toyota’s new endeavors is the GR Super Sport

Concept. Under this concept, Toyota is using mostly

the same main parts and development methods as

those employed for the race cars that it competes

with in the WEC and applying technologies honed

through racing to create a next-generation sports car.

Because race cars are expensive, advancing

development without making prototypes is funda-

mental. We therefore mainly use model-based devel-

opment, in which the entire car is considered and

simulations are run to determine how each function

should run to achieve the desired performance. This

approach enhances performance in less time and

with fewer people even before prototypes are built.

Within the ﬁnely subdivided organizational structure

for mass-market car development, which is opti-

mized for efﬁciency, this kind of approach—looking

at the entire car to optimize each function in concert

with all the others—is difﬁcult to apply. Using model-

based development, Toyota aims to further acceler-

ate efforts to make ever-better cars.

Motor Sports: In Our Roots

The above passage comes from the ﬁnal work of

Toyota founder Kiichiro Toyoda, “Auto Racing and

the Japanese Automobile Industry,” written shortly

before his death.

The demanding environment of competition will

drive the development of our people and cars—car-

rying on this belief, Toyota competes in a number of

types of auto racing.

In April 2017, ten years after our ﬁrst foray into the

Nürburgring 24 Hours race, we established GAZOO

Racing Company, creating a stronger framework for

an ongoing motor sports business and marking the

start of a new chapter.

Nürburgring endurance race. GAZOO Racing, made

up of Toyota employees, competed for the ﬁrst time

that year. It was there that Toyoda, then an executive

vice president, ﬁrst used the pseudonym Morizo to

compete as a driver.

As Naruse said, “There is no better way to pass on

skills and develop people than racing. What’s impor-

tant isn’t discussing automaking with words and

data, but getting in the actual car, touching it, and

discussing with the hands and eyes.” To put this sen-

timent into action, Toyota uses modiﬁed versions of

its production cars in the 24 Hours of Nürburgring

endurance race. By understanding the strengths and

the areas that need improvement of the base cars,

then making them into vehicles that are reliable even

in the most extreme driving conditions, we aim to

learn precisely what it is that makes a car good. This

know-how is then utilized in the GR sports car series.

The Road Builds the People,

and the People Build the Cars

One of the major competitions in which Toyota par-

ticipates is the FIA World Rally Championship (WRC).

Competitors in the WRC drive modiﬁed production

cars on closed sections of public roads. They race

on bumpy unpaved roads, through high-speed cor-

ners on high mountain passes, and over icy patches

hidden beneath snow. In the words of Toyota presi-

dent Akio Toyoda, “Rallying—a form of racing that

takes place on all kinds of roads—is the perfect set-

ting to develop our people and cars.” We are apply-

ing the know-how, technologies, skills, and spirit

gained from these competitions to the cars we man-

ufacture for sale.

2

014, all three of Toyota’s cars in the race won

“

best-in-class” awards, including that for the

SP-PRO class. The Lexus LFA, in which president

Toyoda was a driver, ﬁnished 13th overall, taking the

top position in the SP8 class.

WEB

TOYOTA GAZOO Racing

1

7

TOYOTA Annual Report 2018

Table of Contents

Message from the President

Toward the Mobility Society of the Future

Initiatives for Sustainable Growth

Corporate Data

Toward the Mobility Society of the Future Management Team Connectivity Marketing Electriﬁcation Ever-better Cars GAZOO Racing Automated Driving Partner Robots Business Innovation Developing People Message from the CFO Capital Policy

Steady Progress toward Automated Driving

Toyota’s ultimate goal in developing automated driv-

ing technologies is not simply to create autonomy for

cars, but to create a world in which mobility is safe,

convenient, enjoyable, and available to everyone.

Safety is our topmost priority as we pursue this goal.

We believe that we can enhance safety by building

partnerships between drivers and their cars.

Even in a future where some driving is automated,

we believe that cars will continue to be loved. Toyota

believes that safe and fun automated driving technol-

ogies have the potential to expand freedom of

movement for all and bring cars and people even

closer together.

Achieving this goal will require the development of

safe driving systems that are highly effective in real-

life situations as quickly as possible and the promo-

tion of their uptake as widely as possible. To do this,

Toyota is promoting, in parallel, the development of

advanced safety technologies and the utilization of

insights gained through such development to further

develop popularized technologies. We have already

put our active safety technologies on the market,

packaged as Toyota Safety Sense and Lexus Safety

System+. Such packages are now offered as stan-

dard or optional features on almost all new Toyota

and Lexus models sold in Japan, Europe, and the

United States. Furthermore, with the new Lexus LS,

the brand ﬂagship, we have introduced the Lexus

Safety System + A, which includes such new fea-

tures as Active Steering Assist, a world-ﬁrst technol-

ogy, and Front Cross Trafﬁc Alert (FCTA), which helps

prevent collisions at intersections. In systems for the

non-luxury market, as well, we have introduced the

second-generation Toyota Safety Sense, featuring

expanded hazard detection for a broadened scope

of protection against severe accidents.

Toyota’s Speciﬁc Approaches to

Automated Driving

Under the Mobility Teammate Concept, Toyota is

developing automated driving systems based on two

approaches: Guardian and Chauffeur.

The Guardian approach assumes that a human will

drive the car, while automated driving systems oper-

ating alongside the driver provide support, such as

added braking, acceleration and steering, when

needed, for example, when the car is in danger of

collision, to protect the car’s passengers and people

outside the car. Chauffeur refers to automated driving

as deﬁned by the U.S. non-proﬁt SAE International,

where the autonomy drives for extended period of

time instead of the human driver.

The Mobility Teammate Concept offers the freedom

of choice by allowing users to enjoy the beneﬁts of

automated driving technologies while still allowing

them to drive safely, enjoyably and freely when they

wish. Drivers will be able to choose Chauffeur mode

for some situations, such as expressway and long-

distance travel. Guardian mode will always attempt to

protect people both inside and outside the car, wheth-

er the human or the automated Chauffeur is driving.

Toyota’s Unique Approach to

Automated Driving

Since the 1990s, Toyota has engaged in automated

driving technology research and development aimed

at contributing to the complete elimination of trafﬁc

casualties. Today, Toyota is advancing development

in this area based on its Mobility Teammate Concept.

This concept is an expression of Toyota’s unique

approach to automated driving and is built on the

belief that people and vehicles can work together in

the service of safe, convenient, and efﬁcient mobility.

As implied by the word “teammate,” the inclusion

of people is central to this approach, based on our

belief that people should have choices. The true

value of automated driving technologies, we believe,

lies not in the technology itself, but in the social value

it creates—helping to create a rich mobility society in

which everyone can enjoy safe, convenient, and

enjoyable transportation.

TRI Advanced Safety Research Vehicle Demo

(YouTube, 3:57)

Our Guiding

Developing and Promoting the Use of Advanced Technologies

Development Philosophy

Gill A. Pratt

Fellow

Advanced

technologies

Society with

zero traffic accident

casualties

Moreover, we believe that the most important fac-

tor in the development of automated driving is safety.

This conviction is in line with our long-held stance of

prioritizing the improvement of safety with the ultimate

goal of eliminating casualties from trafﬁc accidents.

Toyota’s unique approach to

automated driving is built on

the belief people and vehicles

can work together in the ser-

vice of safe, convenient, and

efﬁcient mobility.

s �ꢀ )NTEGRNT

s �ꢁ TꢂDUT �ꢃ ꢄST

s �ꢁ TꢂDUT �U ꢅꢃN

Popularized

technologies

1

8

TOYOTA Annual Report 2018

Table of Contents

Message from the President

Toward the Mobility Society of the Future

Initiatives for Sustainable Growth

Corporate Data

Toward the Mobility Society of the Future Management Team Connectivity Marketing Electriﬁcation Ever-better Cars GAZOO Racing Automated Driving Partner Robots Business Innovation Developing People Message from the CFO Capital Policy

Steady Progress toward Automated Driving

generate unprecedented consumer demand, provid-

ing more data and leading to a virtuous cycle of

enhancing mobility, safety, and convenience. As a

result, automated driving technologies will develop

further and be widely adopted by society and con-

sumers. In this way, the introduction of MaaS will

help us achieve the important beneﬁts of automated

driving faster than personal car ownership alone.

In terms of evolving POVs, in January 2018, Toyota

Research Institute, Inc. (TRI) unveiled its next-gener-

ation automated driving research vehicle, Platform

To accelerate the development of intelligence soft-

Developing Automated

Driving Technologies on

Two Complementary Fronts

Three Types of Intelligence and Initiatives

Aimed at Commercialization

ware, in March 2018, Toyota established Toyota

Research Institute Advanced Development (TRI-AD)

in Tokyo. Applying the ideas of the Toyota Production

System (TPS) to software development, TRI-AD is

creating an integrated software development model

spanning research to commercialization. Furthermore,

in the advanced development of automated driving

technologies, Toyota has invested in ALBERT Inc.,

aiming to accelerate technological development by

reinforcing big data analytic processes.

As for the creation of systems that enable people

and cars to work together, we are studying such

questions as how to create user interfaces that

enable the safe transition from human-controlled to

system-controlled driving, actively using simulated

experiments to test our ideas. These initiatives reﬂect

TRI’s human-centric approach.

TRI-AD is advancing automated driving research

using Highway Teammate research vehicles, which we

aim to commercialize by around 2020. These vehicles

will enable driver-supervised automated driving on

expressways that includes merging onto and exiting

expressways, maintaining and changing lanes, and

maintaining appropriate distance from other vehicles.

Testing of Highway Teammate vehicles for use on

Japan’s Metropolitan Expressway and other particu-

larly difﬁcult-to-drive types of expressway is ongoing.

Toyota is advancing the development of automated

driving technologies on two fronts: personally owned

vehicles (POVs) and Mobility as a Service (MaaS).

By offering affordable, on-demand mobility, MaaS

will provide platforms that facilitate the road transport

of more people around the world—for example,

people with disabilities, people who cannot afford to,

or prefer not to, own a car—as well as the logistics

and commerce that are deeply embedded in, and fun-

damental to, everyday life. These on-demand mobility

services will transform cities, helping to invigorate

economies and make society more efﬁcient. To

expand such possibilities of mobility, Toyota has

unveiled e-Palette, a concept vehicle envisioned for

the 2030s that is fully electric and speciﬁcally

designed for MaaS applications.

Realizing automated driving will require three types of

intelligence. The ﬁrst is driving intelligence, entailing tech-

nologies to accurately understand the vehicle’s position

and ﬁnd safe routes. The second is connected intelli-

gence technology to transmit vast volumes of data

about constantly changing road and trafﬁc conditions to

and from cars. The last is interactive intelligence, based

on Toyota’s belief that, in addition to improving the tech-

nologies themselves, it is vital to optimize the user inter-

face to maximize automated driving technologies’

usability. TRI is advancing research on all three types of

intelligence toward the creation of systems that enable

people and cars to work together.

Achieving fully autonomous driving will require deep

learning using data on the surrounding environment pro-

vided by autonomous sensors, such as cameras,

RADAR, and LIDAR, to learn how to avoid collisions.

Chainer, a neural network platform developed by

Preferred Networks, in which Toyota is an investor, will

provide one of the necessary deep learning frameworks.

Chainer was written using CUDA, a computing platform

that runs on graphics processing units (GPUs) devel-

oped by the major GPU manufacturer NVIDIA.

3.0. Built on the Lexus LS 600hL, Platform 3.0 uses

a LIDAR* system made by U.S.-based Luminar

Technologies to “see” 200 meters in all directions,

making it one of the most perceptive automated driv-

ing research vehicles on the road. On top of being

highly functional, the vehicle’s cameras and other

sensors are arranged in a compact package styled

to harmonize with the design of the Lexus LS. The

integrated packaging of the automated driving equip-

ment also makes it easy to reproduce and adapt in

order to build a ﬂeet at scale.

MaaS platforms will also produce the vast

amounts of data essential to automated driving

technologies, helping to reduce the per passenger-

mile cost of transportation. Lower costs, in turn, will

*

LIDAR: Short for light detection and ranging. Technologies or devices that

use lasers to gather 3D information about the surrounding environment.

Approach to Developing Automated Driving Technologies

Intelligence in Driving: The Potential of Deep Learning in Recognition Technology

Deep

AI technology (deep learning)

(Recognition)

Fully automated

learning

driving

100％

Recognition

using data

on entire

Learns

Level 4

features

from vast

volumes of

images

Personally owned

vehicles (POVs)

Transport services

MaaS)

surroundings

(

70％

Level 3

Level 2

Source: NVIDIA

Source: Google

Works with less data,

but recognition is limited

Previous technologies

Gradual improvement

Platform 3.0, Next-Generation Automated

Driving Research Vehicle

Recognizes only

the edges of

white lines

(cannot detect

if edges are

blurred)

Recognizes

only individual

features

(

Local laws; road, traffic, and environmental conditions; speed; driver; etc.)

Limited

Limitless

Data volume

Using

big data

Developing POVs and transport services in parallel

1

9

TOYOTA Annual Report 2018

Table of Contents

Message from the President

Toward the Mobility Society of the Future

Initiatives for Sustainable Growth

Corporate Data

Toward the Mobility Society of the Future Management Team Connectivity Marketing Electriﬁcation Ever-better Cars GAZOO Racing Automated Driving Partner Robots Business Innovation Developing People Message from the CFO Capital Policy

Steady Progress toward Automated Driving

(

3) Strengthen collaboration within the Toyota Group

in the domains of research and advanced

development.

challenges, expanding collaboration with and

support for highly motivated entrepreneurs.

for use in developing and testing automated driving

systems designed to ensure the stability of auto-

mated vehicles in myriad situations that are not

always testable in the real world. Developed by the

1

,000-member Intelligence Software

Development Company Launched

WEB

TAIV

(

4) Recruit and employ top-level engineers globally

while cultivating and coordinating the strong

talent within the Toyota Group.

2

CVC, it is open source and hosted on GitHub.

CARLA offers a multitude of realistic environmental

conditions and is designed to be extended and

easily modiﬁed to ﬁt speciﬁc project needs.

WEB

TRI to Open Automated Vehicle

Test Facility in Michigan

TRI-AD

1

. Open source: A model of software development in which the

source code is made broadly available for use and distribution by third

parties.

TRI is building a new automated vehicle test course

on a 60-acre site within the existing test course of

Michigan Technical Resource Park (MITRP) in

Ottawa Lake, Michigan. The new facility will be used

to safely replicate demanding “edge case” driving

scenarios that are too dangerous to perform on

public roads, accelerating the development of

Guardian Mode research vehicles. The course will

include models of congested urban environments,

slick surfaces, entrance and exit ramps, and a four-

lane divided highway.

TRI Establishes Corporate

Venture Capital Fund

2. GitHub: A web-based software development platform. Users can

upload and publish their work (such as program code or design

data), enabling collaborative review with the millions of developers

on the platform and project management.

In July 2017, TRI established Toyota AI Ventures

TAIV), a venture capital fund to invest in start-ups.

(

Doctors Pratt (left) and Kuffner

TAIV invests in recently established promising start-

ups in the ﬁelds of artiﬁcial intelligence, data and

cloud technology, autonomous mobility, and robot-

ics. In just its ﬁrst year, TAIV invested in 11 start-ups

in the United States, the United Kingdom, and

Israel.

In July 2018, TAIV unveiled a “call for innovation”

global program to support start-ups in partnership

with TRI. This program is designed to spur entrepre-

neurial innovation by identifying key technology

gaps and putting out a call for solutions from start-

ups. Promising start-ups in the areas of the identi-

ﬁed gaps will have the opportunity to secure from

Toyota established Toyota Research Institute-

Advanced Development (TRI-AD), a new, Tokyo-

based company, to accelerate its advanced

development of automated driving technologies. The

new company will be funded by Toyota, Aisin Seiki

Co., Ltd., and DENSO Corporation, which have con-

cluded a memorandum of understanding to invest

a total of more than ¥300 billion in development.

Dr. James Kuffner, former Chief Technology Ofﬁcer

of TRI, will lead TRI-AD as its CEO. The new compa-

ny is targeting a staff of approximately 1,000 employ-

ees, comprising staff sourced from Toyota, TRI, Aisin,

and DENSO along with new hires. A next-generation

company test model, the company is formulating

new ways of doing work and internal rules, including

making English its internal business language.

TRI-AD is applying the Toyota Production System

TRI Accelerating Robotics

Research Using Simulators

$500,000 to $2,000,000 in venture capital funding

from TAIV as well as the possibility of partnering on

a proof of concept project with TRI.

Going forward, TAIV will boldly take on difﬁcult

TRI is accelerating robotics research—one of the

purposes of its establishment—by actively utilizing

experiments run with simulators. Many robots cur-

rently in use are controlled using visual information.

Toyota is adding force and touch sensors to allow

robots to better understand their contact with other

objects and more precisely adjust the force they

apply. Through this research, we hope to quickly

move toward a world where indoor robots assist

people in daily life.

TRI Supporting the Development of

Open-Source Automated Driving Simulator

(

TPS) approach to software development in order to

achieve the following key objectives.

TRI has donated $100,000 to the Computer Vision

Center (CVC) at the Universitat Autònoma de

Barcelona to promote the development of Car

(

1) Create a smooth software pipeline from research

to commercialization, leveraging data-handling

capabilities.

2) Strengthen coordination with TRI and efﬁciently

link research results to product development.

1

The Toyota AI Ventures team and its portfolio companies

visited TMNA headquarters in Plano, TX to participate in the

ﬁrst-ever Toyota Startup Summit.

Learning to Act (CARLA), an open source automat-

ed driving simulator. CARLA is a simulation platform

2

0

TOYOTA Annual Report 2018

Table of Contents

Message from the President

Toward the Mobility Society of the Future

Initiatives for Sustainable Growth

Corporate Data

Toward the Mobility Society of the Future Management Team Connectivity Marketing Electriﬁcation Ever-better Cars GAZOO Racing Automated Driving Partner Robots Business Innovation Developing People Message from the CFO Capital Policy

Solutions for the Problems Facing a Graying Society: Partner Robots

Since the announcement of its development vision

Developing Core Technologies and Advancing Commercialization Based on Real, On-site Needs Gleaned through Ongoing Testing

in 2007, Toyota has been applying its technology

and know-how developed for industrial robots

used in vehicle manufacturing to create partner

robots that offer support for everyday living, work-

ing to bring these robots to market. So-called ser-

vice robots for non-industrial use include robots

designed to inspect infrastructure or provide emer-

gency response. Toyota, however, is focusing on

partner robots that work closely with people to

provide support for living. Japan is rapidly graying,

and its working-age population is decreasing.

Because of these shifts, the burden on the work-

ing-age population of supporting the elderly is

forecast to balloon to approximately three times

the 2000 level by 2050. Toyota aims to use partner

robots to instead keep this burden at around the

Rehabilitation Robot: Welwalk

Social Robot: Pocobee

Human Support Robot: HSR

Humanoid Robot: T-HR3

WW-1000

The Welwalk WW-1000 is designed

to aid in the gait training of patients

with lower limb paralysis due to

stroke or other factors. The robot

offers a range of rehabilitation sup-

port functions based on motor learn-

ing theory, including the ability to

adjust the difﬁculty level of gait train-

ing to suit the patient and to provide

feedback about the patient’s gait

characteristics.

Pocobee is designed to delay the

onset and progression of dementia

and reduce the burden on caregiv-

ers, all increasingly important issues

in light of the forecast increase in

Japan’s number of individuals with

dementia. Veriﬁcation tests of

Pocobee have been ongoing since

2016 at the National Center for

Geriatrics and Gerontology. Going

forward, to help users maintain their

health, we will enhance Pocobee’s

functions that provide goal-oriented

encouragement to users to do more

based on their individual abilities.

By having caregivers and robots

work together, we hope to safely

increase the activity of the elderly

and improve their vital functions

while helping to alleviate the burden

on caregivers.

The human support robot (HSR) can

perform such basic tasks as picking

up, fetching, and handing over

objects and is being developed and

tested for use in such areas as main-

taining senior independence and

health management.

Since 2015, Toyota has provided

this robot to universities and other

research institutions as a platform in

order to foster a development com-

munity and accelerate development

through open innovation.

The HSR was selected as a stan-

dard platform for the RoboCup@

Home competition at RoboCup2017

Nagoya Japan, and will be provided

as the platform robot for the World

Robot Summit 2018 and 2020

Partner Robot Challenge.

In November 2017, Toyota

announced the T-HR3 humanoid

robot. Controlled remotely by a

human operator, the entire body of

this robot moves smoothly using

Torque Servo technology.

The T-HR3 is a partner robot suit-

ed for use in ordinary living environ-

ments. Able to perform ﬁne hand

and arm movements, walk like a

human, and retain its balance using

its entire body, the robot is being

developed to safely work alongside

humans in a range of scenarios,

such as the home and medical insti-

tutions, in order to provide gentle

support for everyday living.

2

000 level.

Under its vision for partner robot technology,

“freedom of mobility for all, and the joy of self-reli-

ance,” Toyota is working to bring to market prod-

ucts that can facilitate medical care, nursing, and

independent living.

From May 2017, we began

accepting rental orders for the robot

from medical institutions, aiming to

rent out 100 units. In September

2

017, we began coordinating with

companies that have strengths in the

medical ﬁeld to supply the robots to

hospitals and other facilities.

In the future, we hope to expand

its applications to include work at

disaster sites, construction sites, and

even in space.

Commercialization Schedule and Development Status

2

018

Around 2020

Target areas

Gait training robot

Social robot

The rehabilitation robot Welwalk WW-1000 received medical device certiﬁcation in November 2016. Rental of the robot began in autumn 2017.

Senior Life Support, Medical Support

Independence Support, Welfare Support

Senior Life Support

We are developing and testing the robot with the aim of both improving the vital functions of elderly users and reducing the burden on caregivers, working to quickly bring it to commercialization.

Standing personal mobility robot We are testing the robots at test-ride events in retail facilities and on public roads as we work with the police and government to expand areas where they can be used.

Balance training assist robot The robot is in use at 21 medical institutions across Japan for clinical research. We are incorporating feedback from doctors, physical therapists, and other users as we work to bring the product to market using Genchi Genbutsu (onsite, hands-on experience).

Human support robot (HSR) We are creating a development community based on open innovation to accelerate technological development and testing aimed at commercialization.

Medical Support

Independence Support

Development

Pilot testing

Commercialization

2

1

TOYOTA Annual Report 2018

Table of Contents

Message from the President

Toward the Mobility Society of the Future

Initiatives for Sustainable Growth

Corporate Data

Toward the Mobility Society of the Future Management Team Connectivity Marketing Electriﬁcation Ever-better Cars GAZOO Racing Automated Driving Partner Robots Business Innovation Developing People Message from the CFO Capital Policy

Connectivity, automated driving, and electriﬁcation

are expanding the possibilities of cars

Toyota works closely with customers to

understand their needs and wants,

striving to enhance the freedom and fun of

Mobility for All

2

TOYOTA Annual Report 2018

Table of Contents

Message from the President

Toward the Mobility Society of the Future

Initiatives for Sustainable Growth

Corporate Data

Toward the Mobility Society of the Future Management Team Connectivity Marketing Electriﬁcation Ever-better Cars GAZOO Racing Automated Driving Partner Robots Business Innovation Developing People Message from the CFO Capital Policy

Toyota’s Business Innovation:

Organizational Framework, the Toyota Group, External Collaboration, and TPS and Cost Reduction

developing Toyota’s existing businesses, we must boldly

move forward to transform into a mobility company.

Reﬂecting the Toyota Group’s determination to

take on this era of profound transformation, in 2018

Toyota moved up the timing for changing its execu-

tive lineup from April to January. To transform the

roles and awareness of executives, we revised the

position of executives within the Company and, from

the perspective of putting the right people in the right

places, appointed people with high levels of exper-

tise, regardless of time with the company or age.

Going forward, all executives and employees will

continue to take on new challenges, acting with the

constant awareness that there is always a better way.

lines. At the same time, the global automotive market

is expected to see continued expansion, chieﬂy in

emerging nations and regions, such as Africa. In

order to bring together the strengths of the whole

Group and effectively use resources in this era of pro-

found transformation, we are applying a “home and

away” perspective as we rebuild the business struc-

ture of the Toyota Group as a whole.

customer requirements. Underlying these efforts is

the Toyota Production System (TPS). The TPS is

based on the two concepts of Jidoka (automation

with a human touch) and Just-in-Time. Jidoka entails

that when a problem occurs, the equipment stops

immediately, preventing the production of defective

products. Just-in-Time means that, in each process,

only what is needed, when it is needed, and in the

amount needed is produced or transported. The

complete elimination of waste, achieved by applying

these two pillars, improves productivity, ultimately

reducing costs.

In this era of profound transformation for the auto-

motive industry, we must anticipate customer needs

to provide more personalized mobility services more

directly and in real time. In other words, we must cre-

ate a world in which the services that are needed are

provided when needed and as needed. This is pre-

cisely the essence of Just-in-Time.

The TPS and its approach to cost reduction are

wellsprings of competitive strength and unique

advantages for Toyota. Thoroughly honing these

strengths will be essential to Toyota’s future survival.

In January 2018, we established the TPS Group

with the aims of redoubling TPS efforts outside of

manufacturing divisions and enhancing competitive

strength and productivity. In June, we placed our

logistics division within the TPS Group. We are accel-

erating Company-wide initiatives that position the

TPS as the core of corporate management.

There Is Always a Better Way: Revising

Our Organizations and Businesses

To further advance the goals of making ever-better

cars and human resource development, Toyota has

been revising its organizational framework and exec-

utive lineup. In terms of organizational framework,

Toyota introduced region-based management in

“Home” refers to operations and regions in which

we can add value ourselves through Genchi

2

011, followed by a business unit system in 2013. To

place greater priority on our Customer First policy

and facilitate quick judgment, quick decisions and

quick action based on Genchi Genbutsu (onsite,

hands-on experience), in April 2016 we established

product-based in-house companies, considerably

changing the orientation of our business structure

from a focus on functions to a focus on products. In

September 2017, we established a new company,

EV C.A. Spirit, to advance the development of basic

structural technologies for electric vehicles via an

approach that is open to the participation of other

companies. Through these and other measures, we

have proactively advanced business innovation.

Toyota has also been working to appoint diverse

human resources to the right positions in its execu-

tive lineup. Transcending practices of the past, efforts

have included appointing our ﬁrst non-Japanese

executive vice president in 2015 and ﬁrst executive

vice president whose career began on the factory

ﬂoor in 2017.

Genbutsu (onsite, hands-on experience) and in which

we have competitive advantages over our rivals.

“Away,” meanwhile, refers to operations and regions

in which we will work with other companies that have

more advantages than we do.

Rather than advancing alone, Toyota is bringing

together the full strength of the Group. We aim to identify

the strengths that make up each company’s “home” turf

to increase productivity and thereby reinforce the com-

petitive strength of the Group as a whole.

Our approach to alliances with partners outside the

Group is the same. Rather than seeking equity-based

business scale expansion, we aim to realize a better

mobility society through speedy, open collaboration

with partners who share our aspirations.

* Toyota Group (16 companies): A corporate group centered on Toyota

Motor Corporation and the company from which it emerged, Toyota

Industries Corporation. The Group comprises Toyota Industries

Corporation, Aichi Steel Corporation, JTEKT Corporation, Toyota

Auto Body Co., Ltd., Toyota Tsusho Corporation, Aisin Seiki Co.,

Ltd., DENSO Corporation, Toyota Boshoku Corporation, Towa Real

Estate Co., Ltd., Toyota Central R&D Labs., Inc., Toyota Motor East

Japan, Inc., Toyoda Gosei Co., Ltd., Hino Motors, Ltd., Daihatsu

Motor Co., Ltd., Toyota Housing Corporation, and Toyota Motor

Kyushu, Inc.

Speed and Openness, Home and Away

Returning to Our Fundamentals to Blaze

the Trail Forward

With the advance of electriﬁcation, automation, con-

nectivity, and other technologies, the automotive

industry has now entered a new phase of coopera-

tion and competition that is transcending industry

Today, the global Toyota Group* sells more than 10

million new vehicles per year. While maintaining and

Toyota strives to efﬁciently and quickly produce vehi-

cles of sound quality, one at a time, that fully satisfy

Toyota Production System

Jidoka

Just-in-Time

Major Actions to Strengthen the Toyota Group from 2016 to Present

(

automation with a

human touch)

Quality must be built in

during the manufacturing

process

Making or transporting

only what is needed,

when it is needed, and in

the amount needed

Toyota and DENSO reach basic agreement to consolidate their electronic component operations at DENSO

Toyota and Toyota Tsusho reach basic agreement to consider the transfer of all Toyota’s sales and marketing operations in

African markets to Toyota Tsusho

June 2018

Toyota Autoparts Philippines, Inc. is made a subsidiary of Aisin to strengthen its competitiveness in the manual transmission

business

May 2018

Toyota Research Institute-Advanced Development, funded by Toyota, Aisin, and DENSO, is established to accelerate

the advanced development of automated driving technologies

March 2018

September 2017

Cost reduction through the complete

elimination of waste

EV C.A. Spirit Corporation, funded by Mazda, DENSO, and Toyota, is established to jointly develop technologies for electric vehicles

*

Subaru, Suzuki, Daihatsu and Hino joined the project effective December 28, 2017

Bringing the Toyota Production System to

Development, p. 16

More details

December 2016 Toyota and Daihatsu launch Emerging-market Compact Car Company

January 2016

Toyota makes Daihatsu a wholly owned subsidiary to strengthen small car operations

Applying the TPS and Accelerating Business

Innovation, p. 37

2

3

TOYOTA Annual Report 2018

Table of Contents

Message from the President

Toward the Mobility Society of the Future

Initiatives for Sustainable Growth

Corporate Data

Toward the Mobility Society of the Future Management Team Connectivity Marketing Electriﬁcation Ever-better Cars GAZOO Racing Automated Driving Partner Robots Business Innovation Developing People Message from the CFO Capital Policy

Developing People: The True Source of Toyota’s Competitiveness

The heart and spirit of Toyota’s manufacturing is the

Toyota Way, and its method of creating things is the

Toyota Production System. Unwaveringly applying

these basic tenets in our global operations, we have

made prioritizing quality, reducing costs, and improv-

ing productivity our mission as we constantly work to

mass-produce ever-better cars at lower cost. Toyota’s

dedication to developing its people makes attaining

these goals possible and is the true source of the

Company’s competitiveness. To get through this once-

in-a-century period of profound transformation and

continue growing, it is imperative that we continually

nurture our people, creating strong manufacturing

teams that can handle each difﬁculty and change by

taking on challenges with skill and perseverance.

The Toyota Production System (TPS) is based on

the concepts of Jidoka (automation with a human

touch) and Just-in-Time. Aiming to make only what is

needed, when it is needed, and in the amount need-

ed and to make ever-better products at lower cost,

we work to reduce costs through the complete elimi-

nation of waste. At Toyota, we believe that if we’re

not moving forward, we’re moving backward, and

that what comes after Kaizen (improvement) is

Kaizen—in other words, Kaizen never ends.

they evolve as we transfer our skills and craftsman-

ship to them. As shown in the example of the callig-

raphy robot, below, before transferring skills to

machines or robots, it is essential to ﬁrst develop

them in people.

Accordingly, developing human resources who can

independently identify issues, think of solutions, and

continuously work toward improvement is essential.

For Toyota, Jidoka means that a machine must

come to a safe stop whenever an abnormality

occurs. Achieving Jidoka therefore requires building

and improving systems by hand until they are reliable

and safe. First, human engineers meticulously build

each new line component by hand to exacting stan-

dards, then, through incremental Kaizen, steadily

simplify its operations. Eventually, the value added by

the line’s human operators disappears, such that any

operator can use the line to produce the same result.

Only then is the Jidoka mechanism incorporated into

actual production lines. Through the repetition of this

process, machinery becomes simpler and less

expensive and maintenance becomes less time con-

suming and costly, enabling the creation of simple,

slim, ﬂexible lines that are adaptable to ﬂuctuations in

production volume.

Craftsmanship is achieved by learning the basic

principles of manufacturing through manual work,

then applying them on the factory ﬂoor to steadily

make improvements. Employees continually hone

their craftsmanship while striving to weave the

insights and techniques that doing so provides into

machines to create new technologies and manufac-

turing methods that, in turn, lead to new insights that

improve their skills. This virtuous cycle of improve-

ment in both human skills and technologies is the

essence of Toyota’s Jidoka. I think that advancing

Jidoka in this way helps to reinforce both our manu-

facturing competitiveness and human resource

development.

Human wisdom and ingenuity is indispensable to

delivering ever-better cars to customers. Going for-

ward, we will maintain our thoroughgoing dedication

to constantly developing human resources who can

think independently and implement Kaizen.

Mitsuru Kawai

The work done by hand in this process is the bed-

rock of engineering skill. Machines and robots do not

think for themselves or evolve on their own. Rather,

Executive Vice President

Creating by Hand: The Foundation of Engineering Skill

Human Skill (Craftsmanship) Is Necessary to Teach the Robot to Write Beautifully Virtuous Cycle of Skills and Technologies

No calligraphy

experience

With calligraphy

experience

Striving to create new technologies

and manufacturing methods

Building Production Lines by Hand

Learning the basic principles of manufacturing • Applying them on-site

•

Virtuous Cycle

Human

Robot

Skill

Technology

Accumulation of Kaizen

Craftsmanship

Digitization,

automation,

mass-

production

Craftsman-

ship

Jidoka / Karakuri*

Robot being trained

Reinforcing manufacturing competitive-

ness and human resource development

Simple, slim, ﬂexible lines

*

Karakuri refers to mechanisms that do not use electricity or other energy sources

2

4

TOYOTA Annual Report 2018

Table of Contents

Message from the President

Toward the Mobility Society of the Future

Initiatives for Sustainable Growth

Corporate Data

Toward the Mobility Society of the Future Management Team Connectivity Marketing Electriﬁcation Ever-better Cars GAZOO Racing Automated Driving Partner Robots Business Innovation Developing People Message from the CFO Capital Policy

Message from the CFO

My role as CFO and advisor to the president is to keep

watch over Toyota’s overall management, maintain

daily communication with the president, come up with

ways to realize the president’s aspirations, priorities,

and strategies, and give directions as appropriate.

Sustainably increasing corporate value is the duty

of all companies. As a mobility company, Toyota is

facing a once-in-a-century period of profound trans-

formation and therefore must advance aggressive

forward-looking investment and business model

innovation. Given this, I would like to share some of

my thoughts on the factors that will be important to

maintain and increase corporate value going forward.

Raising the Value of Our Human

Resources

A company’s true value lies not in its factories,

President Toyoda (center) and vice presidents (from left) Tomoyama, Kawai, Leroy, Kobayashi, Terashi, and Yoshida

machinery, or other physical assets, but in the people

who use them. One of my favorite sayings is from

Shingen Takeda, a prominent 16th century lord and

general, and literally translates as “people are the

stone walls.” In other words, just as rocks of various

shapes and sizes can together form a strong stone

wall, developing and effectively deploying human

resources with diverse values and expertise is essen-

tial to building a strong company.

Management determines the Company’s strategy

and explains the hurdles that must be overcome to

bring out the best efforts of employees so that every-

one at Toyota will work hard and support one another

as a team. Employees hone their respective expertise

and carry out their responsibilities as professionals.

Such daily efforts are the essential elements of

increasing corporate value and the foundation that

supports Toyota.

Cost Reduction, the TPS, and Next-

generation Investment

Maximizing Group Competitiveness

Cost reduction and the Toyota Production System

(TPS) are Toyota’s core strengths and traditions,

handed down from our predecessors. However, I

think that the true essence has not fully inﬁltrated

Toyota at a more fundamental level.

The Toyota Group has grown by building on the foun-

dation laid by Kiichiro Toyoda and constantly pushing

to do better. The strength of the Toyota Group is in its

shared set of basic values. As we prepare to take on

new rivals in as-yet unknown arenas, it is more impor-

tant than ever to return to the roots of the Group and

gather our full strength. By having each Group com-

pany focus on its particular areas of expertise, we will

further enhance our competitiveness. To do this, we

are rebuilding our existing frameworks. I think that the

common values shared by the companies of the

Group are what will enable the success of the “home

and away” strategy espoused by President Toyoda.

To achieve this strategy, we will reduce consolidated

ﬁxed costs, streamline development and investment,

reinforce cost competitiveness, and advance human

resource development to achieve greater results from

the efforts of the Group’s employees and thereby

increase the corporate value of the Group as a whole.

Going forward, I will be sure to report the yearly

progress and results of such initiatives to our inves-

tors and shareholders.

Examining costs means examining actions. We

carefully scrutinize all costs, from each pencil used by

each individual all the way up to major projects, using

the full extent of our knowledge and abilities to deter-

mine which parts of our actions are wasteful so that

we can improve them. When I visit Toyota’s worksites

and talk with employees, I do my utmost to encour-

age them each to develop an awareness of costs

and a concrete view of the value appropriation for

speciﬁc things and actions. By implementing such

activities globally, we are securing the funds to sus-

tainably invest in electriﬁcation, automation, connec-

tivity, and other next-generation technologies and to

accelerate investment in partner companies and

start-ups.

Koji Kobayashi

Executive Vice President,

Member of the Board of Directors

2

5

TOYOTA Annual Report 2018

Table of Contents

Message from the President

Toward the Mobility Society of the Future

Initiatives for Sustainable Growth

Corporate Data

Toward the Mobility Society of the Future Management Team Connectivity Marketing Electriﬁcation Ever-better Cars GAZOO Racing Automated Driving Partner Robots Business Innovation Developing People Message from the CFO Capital Policy

Capital Policy

2

. Growth: Aggressive Forward-looking Investment

development in existing ﬁelds, making equipment

more compact, shortening processes, and facilitating

faster response to changes in production quantities.

Furthermore, in addition to sustainably increasing ROE

by repurchasing shares, we are strengthening invest-

ment management by regularly evaluating the rationality

of our strategic shareholdings in terms of the needs of

our business strategies and economic utility. In these

ways, we are striving to enhance capital efﬁciency.

diversifying our funding base to ensure that we can

respond on all fronts to new challenges and opportuni-

ties in this time of profound transformation in mobility.

Financial Strategy

The auto industry is on the verge of a once-in-a-cen-

tury turning point. We believe that technological inno-

vation in such areas as connected technologies,

automated driving, sharing, and electriﬁcation will be

key to the mobility of the future. Every year, we spend

more than 1 trillion yen on R&D. By enhancing efﬁ-

ciency in existing areas, we are strategically increas-

ing the portion of R&D spending allotted to

Three Pillars

Shareholder Return

We prioritize shareholder return as part of our capital

policy. In principle, shareholder return is determined

on the basis of net income.

The three pillars of Toyota’s ﬁnancial strategy are sta-

bility, growth, and efﬁciency. By maintaining adequate

stability while pursuing growth and efﬁciency over the

medium and long terms, we aim to build a robust

ﬁnancial foundation to support sustainable growth.

We strive to maintain stable and sustainable divi-

dend payments based on a benchmark consolidated

dividend payout ratio of 30% while considering such

factors as our ﬁnancial results, investment plans, and

liquidity. For the ﬁscal year ended March 31, 2018,

we paid an annual dividend of 220 yen per share.

We ﬂexibly consider the repurchase of shares in

light of long-term capital efﬁciency and changes in

our business environment. For the ﬁscal year ended

March 31, 2018, we paid out 549.9 billion yen for the

repurchase of shares, resulting in a total of 74 million

shares acquired. Combined with dividends, this

brought the total annual shareholder return to 1.2 tril-

lion yen, for a consolidated payout ratio of 48.1%.

Going forward, we will strive to further improve net

income and ensure ongoing shareholder return

through dividends and share repurchases.

cutting-edge ﬁelds like the above.

Furthermore, we are investing in new initiatives.

Examples of such investment include the establishment

of TRI-AD, which is funded by Toyota, DENSO and Aisin;

investment in start-ups through the Mirai Creation Fund

and Toyota AI Ventures; and investment in such busi-

ness partners as Grab, ALBERT, and Uber.

Diversifying Our Funding Base

1

. Stability: Securing Liquidity

Having experienced ﬁnancial crises and the Great

East Japan Earthquake, in order to ensure business

continuity in any business environment, we maintain

a sufﬁcient level of liquidity to cover half a year of

both ﬁxed costs in the automotive business and reﬁ-

nancing requirements in the ﬁnancial services business.

Ample liquidity is essential to maintaining a full line-up

in each region and retaining the ability to respond to all

options and opportunities in this era of profound trans-

formation in mobility. As such, it is a vital part of the foun-

dation supporting the creation of corporate value.

To diversify our means of funding, in 2015 Toyota

issued approximately 500 billion yen in Model AA

class shares to raise funds for long-term R&D activi-

ties and build a base of medium- and long-term

shareholders. The funds raised are being invested in

R&D related to advanced and cutting-edge technolo-

gies, such as fuel cells, infrastructure, information

technology, and highly intelligent mobility.

In 2018, we issued 2 billion U.S. dollars in international

straight bonds, our ﬁrst ever such offer overseas. The

proceeds are being used as operating capital and for

capital expenditure. Through such measures, we are

3. Efﬁciency: Enhancing Capital Efﬁciency

Using cost reduction and the thorough application of

the TPS, we are reinforcing the proﬁt structure and

securing funds to invest in advanced and cutting-

edge technologies.

In capital expenditure other than R&D expenses, as

well, we are carefully assigning priority to individual

projects and tracking their progress while advancing

measures to improve productivity, such as streamlining

Dividend per Share and Net Income

Total Shareholder Return and Total Return Ratio

ꢀ

Interim dividend ꢀ Year-end dividend ꢁ Net income (right axis)

ꢀ Total amount of dividends (common shares) ꢀ Total amount of dividends (First Series Model AA Class Shares)

Share repurchase for shareholder returns ꢀ Share repurchase to avoid dilution of common shares

ꢀ

(

2

Yen)

(Billions of yen)

2,500

(Billions of yen)

1,600

50

00

50

2

10

2

00

2

20

1,400

Repurchase in connection with

the issuance of First Series

349.9

2

10

2

1

2,000

1,500

1,000

500

1,800

1

65

1

,200

,000

Repurchase in connection with

the disposition of shares to

Toyota Mobility Foundation

Model AA Class Shares

1

10

110

120

125

639.3

549.9

00

100

90

100

65

800

449.9

1

80.0

293.3

35

600

2.4

4.9

7.4

1,200.1

50

45

50

60

30

180.0

1

00

100

65

25

30

75

400

3

2

0

631.3

645.5

642.6

’18/3

20

627.5

200

522.9

20

-

500

0

(

Years ended)

’09/3

’10/3

141.1

67.4%

’11/3

156.8

38.4%

’12/3

157.7

55.6%

’13/3

285.0

29.6%

’14/3

522.9

28.7%

’15/3

631.3

29.0%

’16/3

645.5

28.3%

’17/3

627.5

34.6%

’18/3

642.6

26.1%

(Years ended)

’14/3

’15/3

’16/3

’17/3

Total amount of payment

billions of yen)

Total shareholder

return* (billions of yen)

313.5

702.9

924.6

1,287.2

55.6%

1,082.4

59.1%

1,200.1

48.1%

1

(

1, 2

Payout ratio*

—

Total return ratio*

38.5%

42.5%

*

Payout ratio: This is the ratio of (i) the amount of dividend per common share to (ii) net income attributable to Toyota Motor Corporation per common share.

*1 Excluding repurchase made to avoid dilution of common shares.

*2 Total Return Ratio: This is the ratio of (i) the sum of dividends on both common shares and the First Series Model AA Class

Shares and the amount of repurchase of common shares for shareholder return to (ii) net income attributable to Toyota

Motor Corporation.

2

6

TOYOTA Annual Report 2018

Table of Contents

Message from the President

Toward the Mobility Society of the Future

Initiatives for Sustainable Growth

Corporate Data

Initiatives for Sustainable Growth Corporate Philosophy Corporate Governance Messages from the Outside Directors Toyota Environmental Challenge Employees Risk Management Compliance Customer First and Quality First

Respect for Human Rights and SCM Working to Better the World around Us

Initiatives for Sustainable Growth

Toyota strives to implement a positive cycle of making ever-better cars that exceed customer expectations,

enriching lives of communities, being rewarded with the smiles of customers and communities and thus rein-

forcing its stable base of business. Through this cycle, Toyota aims to grow sustainably in concert with society.

Even as the business environment transforms and new challenges arise, Toyota will leverage the qualities,

honed over time, that make it unique as it shifts to a longer term strategic perspective in order to maintain and

enhance this positive cycle. By doing so, we will provide value to society in the forms of safety and peace of

mind, environmental sustainability and Waku-doki (excitement and exhilaration that wows you).

Business

The Value Toyota Creates

Environment

Changes

Strategic Shifts

Elimination of

traffic accident

casualties

Freedom of

mobility for everyone

Individual desires/

Societal demands

Electriﬁcation

Safety and

Peace of Mind

Lifestyle changes

Toyota Safety Sense

(Collision Avoidance

Support Package)

Environmental

problems

Integrated Safety

Management Concept

Fruit

Welcab

Enriching

Lives of

Ever-Better

Cars

Raising awareness of road

safety and ecological driving

Urbanization

Communities

Personal mobility

Information

(Connectivity)

Automated driving

Mobility Service

Platform (MSPF)

ITS Connect

road/car and car/car

communications)

(

Ever-Better Cars

Enriching Lives of

Communities

Trunk

Human Support

Robot

Stable Base

of Business

Supporting sports

Environmental initiatives

Technological

innovation

Environmental

Sustainability

Waku-doki

Passing down

expertise

Toyota Production

System (TPS)

(excitement and exhilaration

that wows you)

Intelligent

technologies

Vehicle

development

Zero CO

emissions

2

Roots

Toyota Values

The Five Main Principles of Toyoda

The Guiding Principles at Toyota

The Toyota Way

Intelligence

Automated driving, AI)

Recycling

(

Renewable

energy

MIRAI (FCEV)

Prius PHV

Bringing

Lexus

IoT

the excitement

of cars to

the world

Net positive

society

in harmony

with nature

Working toward

a hydrogen society

Robotics

Motor sports

FC buses

New wonder and

exhilaration

2

7

TOYOTA Annual Report 2018

Table of Contents

Message from the President

Toward the Mobility Society of the Future

Initiatives for Sustainable Growth

Corporate Data

Initiatives for Sustainable Growth Corporate Philosophy Corporate Governance Messages from the Outside Directors Toyota Environmental Challenge Employees Risk Management Compliance Customer First and Quality First

Respect for Human Rights and SCM Working to Better the World around Us

Initiatives for Sustainable Growth

(

SDGs), promulgated in January 2016. In particular,

stakeholders through open, fair communication in

order to contribute to the sustainable development of

society and the planet. As our businesses develop,

our communications with stakeholders also broaden

and deepen. By working always hand-in-hand with

stakeholders and growing together, Toyota consis-

tently provides its three forms of value.

issues, particularly environmental (E), social (S), and

governance (G) issues.

Toyota’s Approach to Sustainable

Growth

Toyota is using its strengths to help to solve global

social issues by reducing trafﬁc casualties (contribut-

ing to SDG 3), building sustainable cities and commu-

nities and improving mobility (SDG 11), and taking

action to address climate change (SDG 13).

Toyota regards addressing environmental issues as

an especially key aspect of sustainability. To help

achieve the Paris Agreement goal of keeping global

warming below 2°C, we are promoting initiatives

under the Toyota Environmental Challenge 2050. In

2018, we established medium-term goals under the

Challenge and are ambitiously working to effect posi-

tive change for the environment.

To respond to these changes, Toyota established

the Sustainability Meeting in 2018. Chaired by the

chief risk ofﬁcer, the meeting’s members include

Outside Directors and Outside Audit & Supervisory

Board Members. The meeting discusses non-

ﬁnancial considerations from a range of angles and

examines the overall direction of management.

Under the Sustainability Meeting, we have also set

up an ESG Committee, in which the operating ofﬁ-

cers in charge lead discussions aimed at promptly

solving speciﬁc issues.

In cooperation with global society, Toyota is working

to contribute to the sustainable development of soci-

ety and the planet through its business activities. At

the root of these efforts are the Five Main Principles of

Toyoda, passed down as the core of Toyota’s corpo-

rate management, and the Guiding Principles, which

lay out how Toyota should be as a company. Based

on our experiences with the 2008 global ﬁnancial cri-

sis and the series of recalls in 2010, in 2011 we

announced the Toyota Global Vision, which lays out

what the Company should strive for going forward.

This approach and these values align with the aims

of the United Nations Sustainable Development Goals

Stakeholder Engagement (Sustainability Data Book 2018,

WEB

p. 73)

Toyota’s Implementation Framework

As the automotive industry faces a once-in-a-century

period of profound transformation, quicker decision

making and greater operational efﬁciency than ever

before are essential. At the same time, stakeholder

expectations are rising with regard to non-ﬁnancial

Furthermore, Toyota places value on all stakehold-

ers in the management of its businesses and strives

to maintain and develop sound relationships with

Helping Solve Global Social Problems

Together with Our Stakeholders

Implementation Framework

Shareholders’ Meeting

Local communities

Global society

National and

local governments

Media

Economic

NPOs/NGOs

International

organizations

Industry

organizations

Board of Directors

Waku-doki

Environmental

Academic

communities

Research

institutions

(excitement and

exhilaration that

wows you)

Sustainability

Safety and

Peace of Mind

Employees

Sustainability Meeting

Chairman: Chief Risk Ofﬁcer (Executive Vice

President)

Business

partners

Shareholders

Attendees: Outside Directors, full-time and Outside

Audit & Supervisory Board Members,

relevant ofﬁcers

Customers

Selected Initiatives Aimed at Contributing to the SDGs

Reducing trafﬁc

casualties

Active safety using Toyota Safety Sense

•The number of vehicles with Toyota Safety Sense has surpassed

8 million globally (as of April 2018)

Disclosure

Committee

ESG Committee

(SDG 3)

Improved mobility

and sustainable

urban development

Realizing a prosperous mobility society while eliminating dispari-

ties in mobility through the Toyota Mobility Fund.

•Example: Project to promote the shift to multiple transportation

modes in Vietnam

•

Environmental,

social, and gover-

nance issues

•

Disclosure control

systems

(SDG 11)

Risk management

Toyota Environment Challenge 2050: New Vehicle Zero CO

2

Addressing

climate change

Emissions Challenge

•

Accelerate development with the goal of selling more than 5.5 million elec-

triﬁed vehicles in 2030 (including more than 1 million BEVs and FCEVs)

(SDG 13)

2

8

TOYOTA Annual Report 2018

Table of Contents

Message from the President

Toward the Mobility Society of the Future

Initiatives for Sustainable Growth

Corporate Data

Initiatives for Sustainable Growth Corporate Philosophy Corporate Governance Messages from the Outside Directors Toyota Environmental Challenge Employees Risk Management Compliance Customer First and Quality First

Respect for Human Rights and SCM Working to Better the World around Us

Corporate Philosophy

world should embrace. The Toyota Way thus clearly

articulates and facilitates the global sharing of values

and practices that had previously been passed down

only as implicit knowledge.

Rewarded with a Smile by Exceeding

Your Expectations.

The Toyota Global Vision

aim to continuously provide value to society in the

forms of safety and peace of mind, environmental

sustainability and Waku-doki (excitement and exhila-

ration that wows you) while enhancing Toyota’s cor-

porate value.

The Guiding Principles at Toyota and

Their Implementation

The Five Main Principles of Toyoda have been

The Toyota Way’s main pillars are the concepts of

continuous improvement and respect for people, with

the keywords of taking on challenges, Kaizen, and

Genchi Genbutsu (onsite, hands-on experience)

under the former and respect and teamwork under

the latter. Continuous improvement means never

being satisﬁed with the status quo and always doing

our utmost to create even greater added value.

Respect for people entails respect for all our stake-

holders and working to achieve business success by

promoting the growth of employees.

The Toyota Global Vision, published in March 2011,

was created through exhaustive, Company-wide

reexamination and discussion of the kind of company

that Toyota aspires to be and the values that it

esteems in light of the Company’s losses following

the global economic crisis of 2008 and the series of

recalls in 2010. We are implementing a positive cycle

of making ever-better cars that exceed customer

expectations, enriching lives of communities, being

rewarded with the smiles of customers and commu-

nities and thus reinforcing our stable base of busi-

ness. By maintaining and enhancing this cycle, we

passed down since Toyota’s founding as the core of

its management. These principles embody the think-

ing of the Toyota Group’s founder, Sakichi Toyoda. In

992, they were reorganized in light of changes in

society and business structure to create the Guiding

Principles at Toyota.

The Guiding Principles at Toyota lay out the kind of

company we want to be. Building on this, the Toyota

Way 2001 (hereinafter called the “Toyota Way”) was

established in 2001, laying out values and business

practices that everyone working at Toyota around the

1

Corporate Principles

WEB

(

Sustainability Data Book 2018, p. 5)

The Two Pillars and Five Keywords of the Toyota Way

Toyota Global Vision

Enriching Lives of

Communities

Contribute to communities

Contribute to the future of mobility

Ever-Better Cars

Fruit Develop vehicles which

exceed customer expectations

Rewarded with a smile

by exceeding your expectations

Fruit

Continuous

Improvement

Toyota will lead the way to the future of mobility,

enriching lives around the world with the safest

and most responsible ways of moving people.

Through our commitment to quality,

Respect

for People

Sustainable

Growth

Challenge

We form a long-term vision, meeting

challenges with courage and

creativity to realize our dreams.

constant innovation and respect for the planet,

we aim to exceed expectations

Respect

Stable Base of

Business

Kaizen

Trunk

We respect others, make every effort

to understand each other, take

responsibility and do our best to

build mutual trust.

and be rewarded with a smile.

We improve our business operations

continuously, always driving for

innovation and evolution.

Roots Toyota Values

The Five Main Principles of Toyoda /

The Guiding Principles at Toyota /

The Toyota Way

We will meet challenging goals

Genchi Genbutsu

by engaging the talent and passion of people,

who believe there is always a better way.

Teamwork

We practice genchi genbutsu... go

to the source to ﬁnd the facts to

make correct decisions, build con-

sensus and achieve goals at our

best speed.

We stimulate personal and profes-

sional growth, share the opportuni-

ties of development and maximize

individual and team performance.

WEB

Toyota Global Vision

2

9

TOYOTA Annual Report 2018

Table of Contents

Message from the President

Toward the Mobility Society of the Future

Initiatives for Sustainable Growth

Corporate Data

Initiatives for Sustainable Growth Corporate Philosophy Corporate Governance Messages from the Outside Directors Toyota Environmental Challenge Employees Risk Management Compliance Customer First and Quality First

Respect for Human Rights and SCM Working to Better the World around Us

Corporate Governance

Toyota’s Corporate Governance (Emphasizing Frontline Operations + Multidirectional Monitoring)

Toyota is a company with an Audit & Supervisory Board. Three of the nine members of Toyota’s Board of Directors are outside members, and three of the six members of its

Audit & Supervisory Board are outside members. In addition to auditing carried out by the Audit & Supervisory Board and an external accounting auditor, Toyota incorporates

the perspectives of diverse stakeholders, including outside experts, to deliberate on and monitor management and corporate conduct.

Fundamental Approach

Toyota regards sustainable growth and the stable,

long-term enhancement of corporate value as essen-

tial management priorities. Building positive relation-

ships with all stakeholders (including shareholders,

customers, business partners, local communities,

and employees) and consistently providing products

that satisfy customers are key to addressing these

priorities. To this end, Toyota constantly seeks to

enhance corporate governance. Moreover, the

Company complies with the general principles of the

Corporate Governance Code promulgated in June

Shareholders’ Meeting

Appointment

Board of Directors

including outside directors)

Audit & Supervisory Board

More than half of the Members are outside

Audit & Supervisory Board Members)

Executive Appointment Meeting/

Suggestion Executive Compensation Meeting

(

Audit

Decision making and management oversight

Submission/Report Supervise

2

015. The speciﬁcs of these efforts are discussed by

Operating Ofﬁcers

Operational Execution

the Sustainability Meeting and reported to the Board

of Directors.

External Accounting Auditor

International Advisory Board

Audit for consolidated ﬁnancial

statements and internal control

over ﬁnancial reporting

Business Units

Advice

Head Ofﬁce

In-house

companies

Labor-Management Council/

Joint Labor-Management

Round Table Conference

Business Execution and Supervision

Dialogue

Supervise

Sustainability Meeting

With the aim of achieving the Toyota Global Vision,

Toyota has been implementing ongoing revisions in

its operational framework in order to quickly respond

to the rapid, unprecedented changes occurring in the

external environment. Toyota introduced region-

based management in 2011, followed by the busi-

ness unit system in 2013 and the in-house company

system in 2016. In April 2017, to accelerate decision

making and business execution, Toyota more clearly

delineated the roles of the Members of the Board of

Directors as decision making and oversight, and the

role of operating ofﬁcers as business execution.

In 2018, to accelerate business execution in con-

cert with other personnel and organizational changes,

we moved up the timing for changing the operating

ofﬁcer lineup from April to January, revised the struc-

ture of our corporate management-related divisions,

and reorganized the Japan Sales Business Group,

shifting from a focus on channels to a focus on

regions. These efforts have yielded a business

Audit

Governance and risk management

Submission/Report

Disclosure Committee

Internal Auditing Department

Disclosure control systems

Internal control systems

framework able to make decisions at points closer to

customers and front-line workplaces.

governance structure under which such initiatives are

carried out.

Initiatives to Reinforce Corporate Governance

Reduced the number of directors (from 58 to 27)

2003 Established the position of managing ofﬁcer

The operating ofﬁcers—mainly the president and

executive vice presidents, to whom authority is dele-

gated by the Board of Directors—work closely with

the business units (the in-house companies and

Business Planning & Operation Unit) to realize prompt

decision making and move forward with initiatives

toward sustainable growth and the medium- to long-

term improvement of corporate value. As part of the

management oversight of operations, the

Toyota has also established an International

Advisory Board, comprising experts from around the

world. The board provides advice on management

issues from a global perspective as needed. Toyota

also deliberates on and monitors management and

corporate conduct from the diverse stakeholder per-

spectives provided by a wide variety of meetings,

such as the Labor-Management Council/Joint Labor-

Management Round Table Conference.

(equivalent to operating ofﬁcer)

Reduced the number of directors (from 27 to 11)

Established the position of senior managing ofﬁcer

2011

2013 Appointed outside directors

Appointed a non-Japanese executive vice president

2015 Implemented measures to comply with the Corporate

Governance Code

2

016 Adopted the in-house company system

017 Clariﬁed the roles of the directors and operating ofﬁcers

018 Established the Sustainability Meeting

Sustainability Meeting deliberates the corporate

3

0

TOYOTA Annual Report 2018

Table of Contents

Message from the President

Toward the Mobility Society of the Future

Initiatives for Sustainable Growth

Corporate Data

Initiatives for Sustainable Growth Corporate Philosophy Corporate Governance Messages from the Outside Directors Toyota Environmental Challenge Employees Risk Management Compliance Customer First and Quality First

Respect for Human Rights and SCM Working to Better the World around Us

Corporate Governance

(

including three outside members) play a key role in

scope determined by resolution of the Shareholders’

Meeting and decided by the Board of Directors with

reference to proposals submitted by the Executive

Compensation Meeting, half the members of which

are Outside Members of the Board of Directors.

Remuneration for Audit & Supervisory Board

Members consists only of ﬁxed basic payments and

does not include bonuses. As a result, this remunera-

tion is not readily impacted by business performance,

helping to ensure independence from management.

Remuneration for Audit & Supervisory Board

Members is determined by the Audit & Supervisory

Board within the scope determined by resolution of

the Shareholders’ Meeting.

Fundamental Approach to and

Maintenance of Internal Control Systems

Toyota’s corporate governance by undertaking audits

in line with the audit policies and plans established by

said board. Toyota’s appointments to the Audit &

Supervisory Board are based on the belief that candi-

dates must offer broad-ranging experience and

insight, particularly in their respective ﬁelds of exper-

tise, and be able to audit business execution and

advise management from a fair and neutral stand-

point. Toyota’s Executive Appointment Meeting, half

the members of which are Outside Members of the

Board of Directors, makes recommendations to the

Audit & Supervisory Board regarding such appoint-

ments. Three individuals, all of whom are registered

as independent ofﬁcers with the relevant ﬁnancial

instruments exchanges, have been appointed as

Outside Audit & Supervisory Board Members. When

selecting Outside Audit & Supervisory Board

Board of Directors

Toyota’s Board of Directors comprises nine members,

three of whom are outside members. The Members

of the Board of Directors are selected based on com-

prehensive consideration of suitability with the aim of

ensuring prompt, appropriate decision making and

appointing the right person to the right position.

Toyota believes that it is crucial to appoint individuals

who comprehend and are capable of putting into

practice its core concepts of making ever-better cars

and Genchi Genbutsu (onsite, hands-on experience).

Moreover, these individuals must be able to contrib-

ute to decision making aimed at sustainable growth

into the future. Toyota’s Executive Appointment

Meeting, half the members of which are Outside

Members of the Board of Directors, makes recom-

mendations to the Board of Directors regarding such

appointments. In order to ensure that outside per-

spectives are adequately reﬂected in management

decision making, the Company has three Outside

Members of the Board of Directors, all of whom are

registered as independent ofﬁcers with the relevant

ﬁnancial instruments exchanges. When selecting

Outside Directors who will serve as independent ofﬁ-

cers, Toyota considers candidates in line with the

requirements set forth in the Companies Act and the

standards of independence established by the rele-

vant ﬁnancial instruments exchanges. Toyota’s

Outside Members of the Board of Directors draw on

their broad experience and insight, including their

respective ﬁelds of expertise, to inform decision mak-

ing from a perspective that is independent of busi-

ness execution.

Basic Stance on System for Ensuring Appropriate

Business Operations

Toyota and its subsidiaries work to foster a sound

corporate culture based on the Guiding Principles at

Toyota and the Toyota Code of Conduct. Toyota inte-

grates the principles of problem identiﬁcation and

Kaizen into its operational processes and continuous-

ly strives to develop employees who will put these

principles into practice.

System to Ensure Appropriate Operations

Toyota endeavors to maintain and properly operate a

system for ensuring the appropriateness of business

operations as a corporate group in accordance with

its Basic Policies on Establishing Internal Controls.

Each ﬁscal year, Toyota inspects the maintenance

and implementation of internal controls to conﬁrm

that the organizational units responsible for imple-

menting internal controls are functioning autono-

mously and enhancing said controls as necessary.

The ﬁndings of these inspections are reviewed by the

Sustainability Meeting and Board of Directors.

Analysis and Evaluation of the

Effectiveness of the Board of Directors

Members, Toyota considers candidates in line with

the requirements set forth in the Companies Act as

well as the standards of independence established by

the relevant ﬁnancial instruments exchanges.

Based on instruction given by the Chairman of the

Board of Directors, the Secretariat of the Board of

Directors conducts quantitative analyses of the exe-

cution of the Board of Directors’ duties, followed by a

survey of the members of the Board of Directors and

Audit & Supervisory Board on the execution of such

duties and its oversight. Furthermore, based on the

results of this survey, the secretariat conducts individ-

ual interviews with the members of the Board of

Directors, including its outside members and the

Outside Members of the Audit & Supervisory Board.

The Secretariat of the Board of Directors compiles

the results of these efforts and presents them to the

Chairman of the Board of Directors, after which they

are reported to and discussed by the Board of

Directors. In ﬁscal 2018, these evaluations found that

the Board was effective. The insights gleaned from

these evaluations regarding accelerating decision

making and business execution oversight are being

used in ﬁscal 2019 to further improve effectiveness.

Remuneration of Members of the Board

of Directors and Audit & Supervisory

Board Members

Corporate Structure (as of June 14, 2018)

Basic remuneration and bonuses for Members of the

Board of Directors are effectively linked to corporate

performance while reﬂecting individual job responsi-

bilities and performance. Remuneration standards in

each member’s home country are also taken into

account when determining remuneration amounts

and methods. Bonuses are paid based on the rele-

vant ﬁscal year’s consolidated operating income,

comprehensively taking into account dividends, the

levels of bonuses for employees, trends at other

companies, medium- to long-term business perfor-

mance and past remuneration. Because the role of

Outside Members of the Board of Directors includes

monitoring and supervising management from an

independent standpoint, they are not paid bonuses.

Director remuneration and bonuses are limited to the

Institutional design

Company with an Audit &

Supervisory Board

Directors

9 (3)

(

Outside directors)

Audit & Supervisory Board

Members

6 (3)

(

Outside members)

Term of ofﬁce for directors 1 year

Executive Appointment Meeting

Voluntary committees

Public accounting ﬁrm

Executive Compensation Meeting

PricewaterhouseCoopers Aarata LLC

Audit & Supervisory Board

WEB

Corporate Governance Report

Toyota has adopted an Audit & Supervisory Board

system. The six Audit & Supervisory Board Members

3

1

TOYOTA Annual Report 2018

Table of Contents

Message from the President

Toward the Mobility Society of the Future

Initiatives for Sustainable Growth

Corporate Data

Initiatives for Sustainable Growth Corporate Philosophy Corporate Governance Messages from the Outside Directors Toyota Environmental Challenge Employees Risk Management Compliance Customer First and Quality First

Respect for Human Rights and SCM Working to Better the World around Us

Messages from the Outside Directors

Remaining Irreplaceable by Leading the Way

to the Mobility Society of the Future

Teiko Kudo

The Five Keywords of the Toyota Way Are the

Core of Future Success

The Boldness, Steadfastness, and Courage

to Thrive over the Next Century

Ikuro Sugawara

Sir Philip Craven

The auto industry is at a once-in-a-century turning point. Serving as

an outside director at such a time is a tremendous responsibility, but

the chance to push forward as part of the Toyota team is also very

rewarding.

I feel a strong afﬁnity with Toyota’s approach of maintaining its

monozukuri (manufacturing) core while incorporating technological

innovations and continuously evolving as well as its aspiration as a

mobility company to create a world where everyone can move about

freely and enjoyably.

As an outside director, I will represent the perspectives of Toyota’s

broad range of stakeholders, including shareholders, users, and soci-

ety at large. By doing so, I will strive to help ensure that Toyota will

continue to play a major part in sustainable global development and

provide irreplaceable value to society over the next 100 years.

At the Ordinary General Shareholders’ Meeting I experienced the

indomitable spirit of Toyota both from the shareholders and also from

the senior executives.

What attracted me to work with Toyota? It is this human spirit, this

passion and the basic principles which underpin TMC and are so

fundamental to its future success.

From my experience, if you choose to ignore the basic principles upon

which you are founded, you will be in trouble sooner rather than later.

These principles are laid out in the ﬁve keywords of the Toyota Way.

The spirit of Challenge leading to the creation of opportunities and

Kaizen, continual improvement, are crucial in the 21st century.

Genchi Genbutsu—get to the root cause, the source—then we can

move forward together. Respect is not a given right but has to be

earned by everyone. And,Teamwork—always giving to the team and

the team then gives back to you! It is great to be on board!

Over the past century, global competition has whittled down the

number of companies in the auto industry to just a few major players.

In just the past few years, however, a number of companies from

other ﬁelds have entered the industry in quick succession. This is

because the scope of the industry is rapidly expanding, reﬂecting a

change in the very deﬁnition of an automobile—from a means of

transport with an engine and four wheels to a mobile space providing

comfort and serving as an information hub.

To survive the next century, Toyota will need the boldness to let go

of its past successes and move forward, the steadfastness to safe-

guard the sources of its true strength, and the courage to leap into

new, unfamiliar ﬁelds, like mobility as a service (MaaS). Bringing to

bear my experience in government and an unfettered perspective, I

will do my utmost to contribute to the creation of such a new Toyota.

3

2

TOYOTA Annual Report 2018

Table of Contents

Message from the President

Toward the Mobility Society of the Future

Initiatives for Sustainable Growth

Corporate Data

Initiatives for Sustainable Growth Corporate Philosophy Corporate Governance Messages from the Outside Directors Toyota Environmental Challenge Employees Risk Management Compliance Customer First and Quality First

Respect for Human Rights and SCM Working to Better the World around Us

Corporate Governance

Board of Directors and Audit & Supervisory Board Members (As of June 14, 2018)

Chairman of the Board of Directors

Member of the Board of Directors

Apr. 1969 Joined TMC

Jun. 1998 Member of the Board of Directors of TMC

Jun. 2001 Managing Director of TMC

Jun. 2003 Senior Managing Director of TMC

Jun. 2005 Executive Vice President of TMC

Jun. 2012 Vice Chairman of TMC

Apr. 1972 Joined TMC

Jun. 2004 Executive Director of DENSO Corporation

Apr. 1981 Joined Ministry of International Trade and Industry

Jul. 2010 Director-General of the Industrial Science and Technology Policy

and Environment Bureau, Ministry of Economy, Trade and Industry

Sep. 2012 Director-General of the Manufacturing Industries Bureau, Ministry

of Economy, Trade and Industry

Jun. 2007 Senior Executive Director, Member of the Board of Directors of

DENSO Corporation

Jun. 2010 Executive Vice President of DENSO Corporation

Jun. 2015 Vice Chairman of DENSO Corporation

Feb. 2016 Advisor of TMC

Jun. 2013 Director-General of the Economic and Industrial Policy Bureau,

Ministry of Economy, Trade and Industry

Jun. 2013 Chairman of TMC (to present)

Apr. 2017 Senior Advisor of TMC

Jul. 2015 Vice-Minister of Ministry of Economy, Trade and Industry

Jul. 2017 Retired from the Ministry of Economy, Trade and Industry

Aug. 2017 Special Advisor to the Cabinet (to present)

Jan. 2018 Executive Vice President of TMC (to present)

Jan. 2018 Member of the Board of Directors of DENSO Corporation

Jun. 2018 Retired as Member of the Board of Directors of

DENSO Corporation

Takeshi Uchiyamada

Koji Kobayashi

Ikuro Sugawara

Outside and

Jun. 2018 Outside Member of the Board of Directors of TMC (to present)

[

Position and areas of

[Position and areas of

responsibility]

Jun. 2018 Member of the Board of Directors and Executive Vice President

of TMC (to present)

Independent Director

Frontier Research Center

Chief Financial Ofﬁcer

Chief Risk Ofﬁcer

(

Chairman)

Vice Chairman of the Board of Directors

Member of the Board of Directors

Apr. 1977 Joined Toyota Motor Sales Co., Ltd.

Jun. 2007 Managing Ofﬁcer of TMC

Sep. 1982 Joined Renault S.A.

Aug. 1998 Retired from Renault S.A.

Oct. 1998 President of the International Wheelchair Basketball Federation

Dec. 2001 President of the International Paralympic Committee

Jul. 2002 Retired as President of the International Wheelchair Basketball

Federation

Sep. 2017 Retired as President of the International Paralympic Committee

Jun. 2018 Outside Member of the Board of Directors of TMC (to present)

Sep. 2007 President of Toyota Motor North America, Inc.

Jun. 2009 Retired as President of Toyota Motor North America, Inc.

Apr. 2012 Senior Managing Ofﬁcer of TMC

Jun. 2015 Member of the Board of Directors and Senior Managing Ofﬁcer

of TMC

Sep. 1998 Joined Toyota Motor Manufacturing France S.A.S.

Sep. 1998 Vice President of Toyota Motor Manufacturing France S.A.S.

Jan. 2005 President of Toyota Motor Manufacturing France S.A.S.

Jun. 2007 Managing Ofﬁcer of TMC

Jul. 2007 Executive Vice President of Toyota Motor Europe NV/SA

Jul. 2009 Chairman of Toyota Motor Manufacturing France S.A.S.

Jun. 2010 President of Toyota Motor Europe NV/SA

Jul. 2010 Retired as Chairman of Toyota Motor Manufacturing France S.A.S.

Apr. 2011 President and CEO of Toyota Motor Europe NV/SA

Apr. 2012 Senior Managing Ofﬁcer of TMC

Apr. 2017 Vice Chairman of TMC (to present)

Shigeru Hayakawa

Didier Leroy

Sir Philip Craven

Outside and

[

Position and areas of

responsibility]

Apr. 2015 Chairman of Toyota Motor Europe NV/SA (to present)

Jun. 2015 Member of the Board of Directors and Executive Vice President

of TMC

Independent Director

Business Planning &

Operation (President)

Chief Competitive Ofﬁcer

Jun. 2017 Member of the Board of Directors and Executive Vice President

of TMC (to present)

President, Member of the Board of Directors

Apr. 1984 Joined TMC

Apr. 1980 Joined TMC

Apr. 1987 Joined Sumitomo Bank

Jun. 2000 Member of the Board of Directors of TMC

Jun. 2002 Managing Director of TMC

Jun. 2003 Senior Managing Director of TMC

Jun. 2005 Executive Vice President of TMC

Jun. 2009 President of TMC (to present)

Jun. 2008 Managing Ofﬁcer of TMC

Jun. 2008 Executive Vice President of Toyota Motor Engineering &

Manufacturing North America, Inc.

May 2011 President and COO of Toyota Motor Engineering & Manufacturing

North America, Inc.

Apr. 2014 Executive Ofﬁcer of Sumitomo Mitsui Banking Corporation

Apr. 2017 Managing Executive Ofﬁcer of Sumitomo Mitsui Banking

Corporation (to present)

Jun. 2018 Outside Member of the Board of Directors of TMC (to present)

Apr. 2012 President and CEO of Toyota Motor Engineering & Manufacturing

North America, Inc.

Apr. 2012 President and COO of Toyota Motor North America, Inc.

Apr. 2013 Retired as President and CEO of Toyota Motor Engineering &

Manufacturing North America, Inc.

Apr. 2013 Retired as President and COO of Toyota Motor North America, Inc.

Apr. 2013 Senior Managing Ofﬁcer of TMC

Jun. 2013 Member of the Board of Directors and Senior Managing Ofﬁcer

of TMC

Jun. 2015 Executive Vice President of TMC

Jun. 2017 Member of the Board of Directors and Executive Vice President of

TMC (to present)

Akio Toyoda

Shigeki Terashi

Teiko Kudo

Outside and

[

Position and areas of

responsibility]

Advanced R&D and

Engineering Company

Independent Director

(

President)

Powertrain Company

Chairman)

(

Chief Safety Technology

Ofﬁcer

3

TOYOTA Annual Report 2018

Table of Contents

Message from the President

Toward the Mobility Society of the Future

Initiatives for Sustainable Growth

Corporate Data

Initiatives for Sustainable Growth Corporate Philosophy Corporate Governance Messages from the Outside Directors Toyota Environmental Challenge Employees Risk Management Compliance Customer First and Quality First

Respect for Human Rights and SCM Working to Better the World around Us

Corporate Governance

Board of Directors and Audit & Supervisory Board Members (As of June 14, 2018)

Full-Time Audit & Supervisory Board Members

Outside Audit & Supervisory Board Members

Oct. 1972 Joined TMC

Apr. 1970 Joined the Fuji Bank, Limited

Jun. 2007 President of Toyota Motor Corporation Australia Ltd.

Dec. 1973 Retired from the Fuji Bank, Limited

May 2014 Chairman of Toyota Motor Corporation Australia Ltd.

Dec. 2017 Retired as Chairman of Toyota Motor Corporation Australia Ltd.

Jun. 2018 Audit & Supervisory Board Member of TMC (to present)

Apr. 1977 Assistant Lecturer of Faculty of Business and Commerce of

Keio University

Apr. 1982 Associate Professor of Faculty of Business and Commerce of

Keio University

Apr. 1993 Professor of Faculty of Business and Commerce of Keio

University

Jun. 2011 Outside Audit & Supervisory Board Member of TMC (to present)

Apr. 2013 Professor Emeritus of Keio University (to present)

Masahide Yasuda

Yoko Wake

Outside and

Independent Member

Apr. 1975 Joined TMC

Jul. 2012 Prosecutor-General

Jan. 2009 President of Toyota Motor (China) Investment Co., Ltd.

Jun. 2009 Managing Ofﬁcer of TMC

Jul. 2014 Retired from Prosecutor-General

Sep. 2014 Registered as Attorney

Apr. 2011 Retired as President of Toyota Motor (China) Investment Co., Ltd.

Jun. 2011 Audit & Supervisory Board Member of TMC (to present)

Jun. 2015 Outside Audit & Supervisory Board Member of TMC (to present)

Masahiro Kato

Hiroshi Ozu

Outside and

Independent Member

Apr. 1983 Joined TMC

Apr. 1974 Joined Mitsubishi Bank

Jun. 2015 Audit & Supervisory Board Member of TMC (to present)

Jun. 2001 Executive Ofﬁcer of The Bank of Tokyo-Mitsubishi, Ltd.

Oct. 2005 Director of Mitsubishi UFJ Financial Group, Inc.

Jan. 2006 Managing Director of The Bank of Tokyo-Mitsubishi UFJ, Ltd.

Oct. 2008 Senior Managing Director of The Bank of Tokyo-Mitsubishi UFJ, Ltd.

Jun. 2009 Deputy President of The Bank of Tokyo-Mitsubishi UFJ, Ltd.

Jun. 2009 Managing Ofﬁcer of Mitsubishi UFJ Financial Group, Inc.

Oct. 2010 Deputy President of Mitsubishi UFJ Financial Group, Inc.

Apr. 2012 President of The Bank of Tokyo-Mitsubishi UFJ, Ltd.

Apr. 2012 Director of Mitsubishi UFJ Financial Group, Inc.

Apr. 2013 President & CEO of Mitsubishi UFJ Financial Group, Inc.

Jun. 2015 Director, President & Group CEO of Mitsubishi UFJ

Financial Group, Inc. (to present)

Yoshiyuki Kagawa

Nobuyuki Hirano

Outside and

Independent Member

Apr. 2016 Chairman of the Board of Directors of Bank of

Tokyo-Mitsubishi UFJ, Ltd.

Apr. 2018 Company name changed from The Bank of

Tokyo-Mitsubishi UFJ, Ltd. to MUFG Bank, Ltd.

Jun. 2018 Outside Audit & Supervisory Board Member of TMC (to present)

3

4

TOYOTA Annual Report 2018

Table of Contents

Message from the President

Toward the Mobility Society of the Future

Initiatives for Sustainable Growth

Corporate Data

Initiatives for Sustainable Growth Corporate Philosophy Corporate Governance Messages from the Outside Directors Toyota Environmental Challenge Employees Risk Management Compliance Customer First and Quality First

Respect for Human Rights and SCM Working to Better the World around Us

Toyota Environmental Challenge 2050 and 2030 Milestone

Toyota Environmental Challenge 2050

Achieving the Toyota Environmental Challenge 2050: The 2030 Milestone

Toyota has long carried out a wide range of initiatives aimed at addressing a host of mounting environmental

problems, including extreme weather phenomena attributable to greenhouse gases, biodiversity loss due to

development, and water shortages due to population growth. Toyota announced the Toyota Environmental

Challenge 2050 in October 2015. In addition to continuing efforts to reduce the environmental burden attribut-

able to automobiles to zero, we have set ourselves six challenges aimed at helping to build a sustainable world

through initiatives that will positively impact the earth and society.

In December 2017, Toyota announced a new medium- to long-term initiative centered on the development and

rollout of electriﬁed vehicles to help realize the targets of the Toyota Environmental Challenge 2050. This initiative

will focus on popularizing electriﬁed vehicles in the decade from 2020 to 2030. The 2030 Milestone indicates

the progress we aim to have made as of 2030 toward the six challenges of the Toyota Environmental Challenge

2050. We are advancing these initiatives in concert with the Toyota Environmental Action Plan, which lays out

speciﬁc action plans and targets for every ﬁve-year period, to contribute to the realization of a sustainable society.

Toyota Environmental Challenge 2050

Milestones for 2030, on the Way to Achieving

the Toyota Environmental Challenge 2050

Challenge 2

Life Cycle Zero CO2 Emissions Challenge

Toyota Environmental Challenge 2050

Completely eliminate all CO2 emissions from the entire vehicle life cycle

2030 Milestone

Challenge 1

Challenge 3

New Vehicle Zero CO

2

Emissions Challenge

Plant Zero CO2 Emissions Challenge

Reduce global average CO

new vehicles by 90% from Toyota’s 2010 global level

2

emissions during operation from

Achieve zero CO2 emissions at all plants worldwide by 2050

•

Reduce CO

2

emissions by 25% or more over the entire vehicle life cycle compared

2

030 Milestone

to 2013 levels by promoting activities for the milestones of Challenges 1 and 3 and initiatives

with support from stakeholders, such as suppliers, energy providers, infrastructure developers,

governments, and customers

2030 Milestone

•

Record annual global sales of more than 5.5million electriﬁed vehicles,

•

Reduce CO

2

emissions from global plants by 35% compared to 2013 levels

including more than

1million zero-emission vehicles (BEVs and FCEVs)

2050

Reduce global average CO2 emissions from new vehicles (g-CO2/km)

3

5

% or more from 2010 levels

note that this is an estimate and results may vary depending on market conditions)

(

Toyota Environmental Challenge 2050

2

030

Toyota Environmental Challenge 2050

Challenge 4

MILESTONE

Challenge 6

Challenge of Minimizing and Optimizing Water Usage

Challenge of Establishing a Future Society in

Harmony with Nature

Minimize water usage and implement water discharge management

based on individual local situations

Toyota Environmental Challenge 2050

Connect nature conservation activities beyond the Toyota Group and

its business partners among communities, with the world, to the future

2

030 Milestone

Challenge 5

Challenge of Establishing a Recycling-based Society

and Systems

•

Implement measures, on a priority basis, in the regions where the water environment is consid-

ered to have a large impact

2030 Milestone

Promote global deployment of end-of-life vehicle treatment

and recycling technologies and systems developed in Japan

Water quantity: Complete measures at the

in North America, Asia, and South Africa

4

challenge-focused plants

• Realize “Plants in Harmony with Nature”—12in Japan and 7overseas—

as well as implement activities to harmonize with nature in all regions where Toyota operates in

collaboration with local communities and companies

2030 Milestones

Water quality: Complete impact assessments and countermeasures at all of the 22

•

Contribute to biodiversity conservation activities in collaboration with NGOs and others

Expand initiatives both in-house and outside to foster environmentally

conscious persons responsible for the future

•

Complete establishment of battery collection and recycling systems globally

plants where used water is discharged directly into rivers in North America, Asia, and Europe

•

Complete set up of 30model facilities for appropriate treatment and recycling of

•

Disclose information appropriately and communicate actively with

local communities and suppliers

end-of-life vehicles

3

5

TOYOTA Annual Report 2018

Table of Contents

Message from the President

Toward the Mobility Society of the Future

Initiatives for Sustainable Growth

Corporate Data

Initiatives for Sustainable Growth Corporate Philosophy Corporate Governance Messages from the Outside Directors Toyota Environmental Challenge Employees Risk Management Compliance Customer First and Quality First

Respect for Human Rights and SCM Working to Better the World around Us

Toyota Environmental Challenge 2050 and 2030 Milestone

Key Fiscal 2018 Initiatives under Toyota Environmental Challenge 2050

Challenge of Minimizing and Optimizing

Water Usage

Challenge of Establishing a Future Society in

Harmony with Nature

New Vehicle Zero CO2 Emissions Challenge

2

0th Anniversary of the Prius’s Launch

The Toyota Water Environment Policy—Helping Achieve

Five-year Partnership with IUCN to Enhance Data

Since its launch in 1997 as the world’s ﬁrst mass-produced hybrid pas-

senger vehicle, the Prius has continued to blaze the trail forward. 2017

marked the 20th anniversary of the Prius’s launch. The name “Prius,”

derived from the Latin for “to go before,” was chosen to embody the

idea of a vehicle that will help shape the future of the Earth. The Prius

has gained the support of millions of customers with whom this idea res-

onates. Based on the concept that eco-friendly vehicles can best con-

tribute to society if they are in widespread use, through the Prius and the

other electriﬁed vehicles that have inherited its environmental technolo-

gies, we will strive to contribute to the global environment alongside the

customers who use these vehicles.

Our Aquatic Environment Challenge Globally

on Global Threats to Biodiversity

While the speciﬁc issues and ways of addressing them vary by region,

Toyota has created the Toyota Water Environment Policy to help it accom-

plish the challenge it has set itself with regard to the aquatic environment.

The Toyota Water Environment Policy promotes activities aimed at eval-

uating and minimizing Toyota’s impact on the natural aquatic environment

in terms of both input, by rigorously reducing the amount of water it uses,

and output, by rigorously cleaning water it has used. We take action on

three fronts—the pursuit of environmental technologies, community-root-

ed operations, and cooperation with society—and strive to be the best

factory in the region and thus contribute to regional prosperity.

Toyota began a ﬁve-year partnership with the

International Union for Conservation of Nature (IUCN)

in May 2016 to raise awareness of the present biodi-

1

versity crisis. Under the partnership, we are providing

annual grants of approximately US$1.2 million to sup-

port the broadening of the IUCN Red List of

2

Threatened Species™. With this support, the IUCN will conduct extinc-

tion risk assessments for more than 28,000 species, approximately 35%

of all species requiring such assessment. This represents a major step

toward the IUCN’s goal of gaining a comprehensive view of the conser-

vation status of earth’s biodiversity.

The Heritage and Future of Toyota Hybrid Technologies

Rigorous Reduction of Water Consumption

1

. The International Union for Conservation of Nature: Founded in 1948 as an international initia-

tive, the IUCN is a global nature conservation network comprising nations, government agen-

cies, non-governmental organizations, and other organizations

The Toyota Hybrid System (THS) used in the ﬁrst-generation Prius

evolved into the THS II and, later, its use was expanded to other models.

Toyota positions hybrid technologies as core technologies as it develops

a range of electriﬁed vehicles, including PHEVs, BEVs, and FCEVs.

Based on evaluations of the impact of water usage volume on the water

environment, we designated four plants in three regions as challenge-

focused plants and are advancing related initiatives at said plants.

2. The IUCN Red List of Threatened Species™ is a global inventory of the conservation status of

species that is managed by the international organization IUCN

Rigorous Cleaning of All Water before Discharge

We are working to maintain and control the water quality of our water

discharge, not only maintaining strict legal compliance, but setting volun-

tary control standards that are even more stringent than those speciﬁed

by laws and regulations. In ﬁscal 2018, we designated 22 water-quality

challenge-focused plants in three regions.

Five-Year Partnership with WWF for the Living Asian Forest Project

In July 2016, Toyota and the World Wide Fund for Nature (WWF) began

a ﬁve-year partnership aimed at accelerating the globe’s transition to

sustainability. Toyota is the ﬁrst car company and the ﬁrst Japanese

company to sign a Global Corporate Partnership agreement with WWF.

To help conserve biodiversity under the partnership, Toyota has donat-

ed US$1 million a year since 2016 and offered other forms of support to

the Living Asian Forest Project. The Living Asian Forest Project is reinforc-

ing existing WWF initiatives to conserve tropical rainforests and biodiver-

sity in Southeast Asia and helping develop new conservation initiatives.

Fourth-generation Prius

Debuted December 2015

Fuel economy: JC08 test cycle

Prius Sales

3

4.0–40.8 km/l

Annual sales (left axis)

Millions of vehicles)

Cumulative sales (right axis)

Third-generation Prius

(

Debuted May 2009

Fuel economy: JC08

test cycle

0

.6

.5

.4

.3

.2

.1

0

5

4

3

2

1

0

4.23 million

3

0.4–32.6 km/l

Toyota Water Environment Policy

Toyota prioritizes the sustainability of water resources and aims to create an affluent society

to ensure that sound aquatic environments can be shared by future generations.

Second-generation Prius

Debuted September 2003

Fuel economy: JC08 test cycle

7.0–29.6 km/l

Fuel economy: 10.15 test cycle

3

million

Being the best factory in the region

to contribute to the whole community’s prosperity

2

First-generation 30.0–35.5 km/l

Prius

Debuted

December 1997

Fuel economy:

IN

OUT

1

0.15 test cycle

1 million

2

8.0–31.0 km/l

Rigorous reduction of water consumption

Rigorous cleaning of all water before discharge

Minimize water intake at each factory

and utilize rainwater to minimize impact

on local water sources

Make a positive impact on the environment

by making wastewater cleaner than

the body into which it is discharged

’

97 ’98 ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17 ’18

WEB

(January–March)

Environmental Report 2018

3

6

TOYOTA Annual Report 2018

Table of Contents

Message from the President

Toward the Mobility Society of the Future

Initiatives for Sustainable Growth

Corporate Data

Initiatives for Sustainable Growth Corporate Philosophy Corporate Governance Messages from the Outside Directors Toyota Environmental Challenge Employees Risk Management Compliance Customer First and Quality First

Respect for Human Rights and SCM Working to Better the World around Us

Employees

Toyota prioritizes respect for people, aiming to pro-

vide employees with opportunities to make social

contributions and realize self actualization through

their work and to allow them to exercise their ability

to think, create, and take action.

To achieve this goal, a relationship of mutual

trust and mutual responsibility between labor and

management is essential. In such a relationship,

the company places the highest priority on ensur-

ing stable employment for its employees and pro-

actively strives to improve labor conditions, while

employees do their utmost to enhance the pros-

perity of the company. This philosophy is shared by

all Toyota afﬁliates around the world and, together

with considerations for regional characteristics, is

reﬂected and implemented in Toyota’s manage-

ment and policies.

Toyota believes that this approach leads not only

to management that operates with respect for peo-

ple, but to customer satisfaction and social contri-

bution and thus to the sustainable growth of both

the company and society.

To this end, Toyota is implementing human

resource development aimed at sustainable growth

through a global educational program centered on

the application of the Toyota Way. On-the-job training

(OJT) is the foundation of this program.

Applying the TPS and

Accelerating Business Innovation

The Toyota Production System (TPS) is based on the

concepts of Jidoka (automation with a human touch)

and Just-in-Time and aims to completely eliminate

waste and steadily reduce costs. To promote TPS-

related activities on a company-wide basis, bridging pro-

duction, administrative and engineering departments,

Toyota created the TPS Group in January 2018.

Fundamental Approach regarding

Human Resource Development

On the Job Training

Human Resource Development Rooted

in Genchi Genbutsu

Toyota is committed to developing human resources

in accordance with its philosophy that monozukuri

(manufacturing) is about developing people. In order

to sustain growth, it is essential to utilize the wisdom

of our people to make constant improvements.

At the same time, while employees bring a wide

range of cultures and customs, to make ever-better

cars and carry out our Customer First policy, all

employees must share certain values.

In line with Toyota’s concept of Genchi Genbutsu

(onsite, hands-on experience), we believe that the

workplace is the basis for human resource develop-

ment at Toyota. Being mentored by supervisors and

senior colleagues and, in turn, mentoring subordi-

nates and junior colleagues to build mutually beneﬁ-

cial learning relationships in the course of daily work

To make work in administrative and engineering

divisions better, more cost effective, and more timely,

we are beginning by applying a similar approach to

that taken at production sites, ﬁnding ways to achieve

more consistent and standardized operations. Using

concepts from production processes, we are creating

workﬂow charts for these divisions to determine

where information is getting backed up so that we

can remove bottlenecks and reduce lead times.

By applying TPS principles to administrative and

engineering divisions, as at production sites, we are

reducing lead times, promoting rapid problem solv-

ing, and strengthening our organizations. These

efforts are helping promote business innovation.

Furthermore, we have newly identiﬁed seven types

of waste at administrative and engineering divisions*

and are advancing company-wide efforts to change

mindsets and implement improvement measures. For

example, with the support of the TPS Group, the

Accounting Division has taken stock of end-of-period

accounting operations to identify waste and advance

improvement. We are steadily implementing similar

initiatives in all divisions and broadly sharing success-

ful examples as we work toward the application of

the TPS, a strength of Toyota, throughout the Company.

(

OJT) provide the basic experiences that drive profes-

WEB

sional growth. In addition, to supplement OJT, Toyota

offers a variety of off-the-job training programs.

Toyota Way 2001

Toyota’s Approach to OJT

OJT

In tandem with OJT

Personnel

system

Off-the-job

training

Sharing the Values of

the Toyota Way Globally

We have organized job skills and techniques into a

framework that we call Global Content to help Toyota

employees around the world understand and prac-

tice the Toyota Way as a shared set of values and

ways of thinking. Global Content is utilized by Toyota

employees through both on- and off-the-job training

in Japan and overseas.

* The seven types of waste at administrative and

engineering divisions: Non-value-adding activities

related to meetings, consensus-building, documen-

tation, coordination, supervisors’ pridefulness, over-

reliance on routine, and lack of follow through.

WEB

Employees (Human Resource Development, Sustainability Data Book 2018, p. 61)

3

7

TOYOTA Annual Report 2018

Table of Contents

Message from the President

Toward the Mobility Society of the Future

Initiatives for Sustainable Growth

Corporate Data

Initiatives for Sustainable Growth Corporate Philosophy Corporate Governance Messages from the Outside Directors Toyota Environmental Challenge Employees Risk Management Compliance Customer First and Quality First

Respect for Human Rights and SCM Working to Better the World around Us

Employees

Since 2016, 1,100 managers have begun posting

“Ikuboss declarations” related to diversity manage-

ment via the Group intranet. These declarations,

which include information about workplace initiatives

and messages to subordinates, are helping to foster

a culture of mutual support for the work and success

of diverse employees.

In 2018, we are implementing diversity management

training for employees who have been newly promoted

as managers. Furthermore, in addition to such training

for managers, we are implementing “Emotional Barrier-

free Training” for young employees to deepen under-

standing of LGBT individuals, wheelchair users and

other people often discriminated against.

resources at overseas afﬁliates is based on education

conducted by afﬁliates in each region, with OJT at

Toyota Motor Corporation (TMC) so that participants

can learn Toyota-style ways of working. In addition,

we are implementing a program similar to GLOBAL

Promoting Diversity and Inclusion

Toyota has positioned the promotion of diversity

and inclusion in the workplace as an important

management strategy. We are working to create

workplaces where human resources with diverse

abilities and values can thrive and each individual

can achieve positive self actualization.

Diverse perspectives help to generate novel

ideas and identify new issues. Toyota aims to use

these contributions to help enhance its competi-

tiveness and make ever-better cars.

Work Style Innovation

Toyota is advancing work style innovation to improve

productivity and support employees seeking to contin-

ue working by providing child care or nursing care for a

family member. In October 2016, we expanded our

remote working program with the introduction of the

Free Time & Location (FTL) system. By adopting more

ﬂexible work styles, Toyota aims to make the most of

each individual’s abilities and maximize results. While

the previous remote working program was available

only to employees with childcare or nursing care

responsibilities, all employees that meet certain condi-

tions can request the permission of their supervisors to

use the FTL system. As of March 31, 2018, of the

approximately 13,200 employees who qualify for the

FTL system, approximately 3,300 are using it.

We have received a great deal of positive feedback

from users of the program already, with employees

commenting, for example, that the system has made

them more aware of time and thus more efﬁcient

when working, and that they have more time to

spend with family.

From April 2018, we have been introducing a new

partial remote working program for assistant staff

members.* We are advancing initiatives aimed at

reforming work styles throughout our workplaces.

21 for employees of TMC in Japan.

Localizing the Management of

Overseas Afﬁliates

Taking a long-term perspective, Toyota seeks to

localize the management of its overseas afﬁliates,

with deciding what to do as the role of TMC in Japan

and deciding how to do it the role of local afﬁliates.

In principle, chief ofﬁcers and other executives

responsible for operations in overseas regions are

stationed in their respective regions as part of efforts

to create a management system closely rooted in

local communities.

We also actively hire and promote local human

resources. As of June 2018, three of the Group’s six

regional headquarters were led by non-Japanese

chief ofﬁcers, and TMC’s top management includes

seven non-Japanese nationals (of whom one is an

Outside Member of the Board of Directors).

We are also advancing the localization of manage-

ment posts. This is enabling us to quickly process

feedback from customers and workplaces in each

region and utilize such information in management

decision making.

We are advancing these and other initiatives with

the aim of practicing diversity management in all

Group workplaces.

Developing Executives Globally

The GLOBAL 21 program is aimed at developing

executives globally. The program serves to enable

outstanding human resources from around the world

to obtain the skills and discernment expected of

global-level Toyota executives and to fully realize their

individual strengths in their respective roles. The pro-

gram consists of the following three pillars.

Gender

Nationality

Age

Diversity

&

*

Available only for employees with childcare or nursing care responsibilities

1. Ensuring understanding of our management

philosophy and the expectations of executives

We are applying the Toyota Way and Toyota Global

Vision, incorporating them into global personnel eval-

uation systems and education.

Inclusion

Overseas Executive Positions Held by

Local Employees

Childcare/

Nursing

care

(%)

Diversity Management

LGBT

Fiscal year

2014

2015

2016

2017

2018

Local

employees

64.7

62.9

62.6

65.8

67.8

Toyota’s employees in managerial positions are lead-

ing diversity management initiatives to create work-

places where diverse human resources can thrive. At

Toyota, we call a boss who can carry out diversity

management, Ikuboss. We are working to develop

supervisors who understand and support the values

and career goals of subordinates, taking a ﬂexible

approach to management to produce results at the

organizational level while also giving ample consider-

ation to the quality of both their own and their subor-

dinates’ private lives.

2. Personnel management

Disability

We are unifying evaluation standards and processes

globally to ensure fairness and consistency. Our main

evaluation criteria are individuals’ ability to set tasks,

carry out tasks, manage their organization, and effec-

tively utilize human resources as well as the level of

trust and respect that others have for them.

Non-Japanese Executives in Charge of

Operations in Overseas Regions

Region

Name

Title

North America Region James E. Lentz

Senior Managing Ofﬁcer

Europe Region

Johan van Zyl

Latin America &

Caribbean Region

Steve St. Angelo

Senior Managing Ofﬁcer

3. Development framework and education programs

We are allocating human resources and developing

executives globally. Our development of human

Employees

WEB

(Diversity & Inclusion, Sustainability Data Book 2018, p. 65)

3

8

TOYOTA Annual Report 2018

Table of Contents

Message from the President

Toward the Mobility Society of the Future

Initiatives for Sustainable Growth

Corporate Data

Initiatives for Sustainable Growth Corporate Philosophy Corporate Governance Messages from the Outside Directors Toyota Environmental Challenge Employees Risk Management Compliance Customer First and Quality First

Respect for Human Rights and SCM Working to Better the World around Us

Employees

Taking the Initiative at Each Workplace

Putting Child Care-related Work Style Innovation into Practice

Toyota has no future if it just keeps doing the same things—spurred by

My household consists of myself, my wife, and my daughter. My wife

and I both work. When my daughter was about nine months old, I used

the parental leave system for about a month.

During my leave, I took full charge of the care of our daughter, which

helped give my wife peace of mind, knowing that I could handle things if

something happened and she couldn’t be there. Although it was only a

month, it was thus an important experience for me and for my family.

Because I took parental leave, my wife, who had been away from work

since before our daughter was born, was able to go back sooner, which

I think will be beneﬁcial for her career.

My parental leave also provided a chance to really experience the

world outside the parameters of the company. I was reminded that the

values that hold true within the company aren’t everything, and that it is

essential to look at the real world when engaging in manufacturing. In

this sense, my leave was extremely valuable for me as a father and as

someone involved in manufacturing. I very much hope to see further

reforms to work systems and styles so that it will be easy and unremark-

able for anyone to take this kind of leave.

Let’s Change Toyota!

The Start of Reforms at

the Individual Level

Report from a Roundtable Held

by the Process Quality

Innovation Division

One-month Parental

Leave for Fathers

Hidemasa Komatsu,

Design Department

this sentiment and sense of urgency communicated by top manage-

ment, bottom-up reforms led by front-line staff are getting under way.

As one example of an initiative based on an open-minded, pro-action

approach, a group of employees applied the Genchi Genbutsu (onsite,

hands-on experience) principle to humbly learn from the methods of

another company. By doing so, we were able to achieve a level of preci-

sion and speed in development that we had not reached before.

Thinking outside the bounds of existing methods, we went back to the

basics, starting by focusing on ﬁguring out what it is that customers are

really looking for. From there, everyone put their heads together, expand-

ing the scope of our activities across business areas and functions to

arrive at solutions. By sharing such initiatives in which each individual

takes a proactive role and by learning from one another, we are working

to change the old methods that we have taken for granted.

Activities like these are now starting at all kinds of workplaces across

Toyota, regardless of organization or individual position. To be rewarded

with the smiles of customers and to create the mobility society of the

future, we understand that every employee will have to change, and we

are putting the full strength of the company into accelerating reforms

that involve every employee.

Since its establishment in 2012, the Future Project Department has

advanced Future Scenario & Concept (FSC) activities as one of its main

functions. These activities entail drawing up future scenarios and then

planning and proposing services and business models to enable freer

urban mobility. Now, under the Breakthrough-project (B-project), the

department is going a step beyond FSC activities, not only ﬁnding ideas

from across the company, but aiming to provide incubation to develop

them and shepherd them all the way to commercialization and the cre-

ation of exit strategies.

Speciﬁcally, driven individuals can sign up to participate in “B Dojo”

study meetings outside normal work hours to develop their ideas and

draft proposals. The division then selects the most promising proposals

to take into the incubation phase. As part of this idea creation process,

we ask the divisions to which these projects are likely to be handed off

after incubation to help come up with exit strategies. Until now, the

Future Project Department’s new initiatives have mostly involved outside

partners. The B-project, however, is an attempt to co-create new value

by connecting with people who want to make something new both in

and outside Toyota. This is why Toyota has named the project

Starting when I was pregnant with my ﬁrstborn, I took three years off

before returning to work. When I found out I was going to have a child, I

was incredibly happy. At the same time, though, no one at my work-

place had ever used the support systems for working parents. I couldn’t

see how I would be able to keep working and thought about resigning.

Seeing my unease, my boss recommended that I use the systems and

try to adjust my work style, so I decided to give it a try.

When I ﬁrst came back to work, I used the shortened working hours

system. My husband helped me handle emergencies, like when our

child suddenly developed a fever and had to be picked up from daycare.

Even so, there were never enough hours in the day, and I wasn’t able to

give as much as wanted to work or to childcare. I came close to throw-

ing in the towel many times. I then decided to use the full-time telecom-

muting system, which freed me from the pressure of having to leave

work by a set time every day. I was the ﬁrst at my workplace to use this

system, but, with the support of my family and colleagues, I was able to

continue working.

Making the Desire for

Change a Reality

The Future Project Department:

Soliciting Ideas within Toyota

for Co-Creation

What I Learned from

Using Work-Life Balance

Support Programs

Tomoko Motohashi,

Purchasing Planning Division

It was often hard, but I realized that time management is the key to

working while raising children. I also strive to break down my everyday

work into speciﬁc tasks, prepare effectively, and identify the important

tasks to focus on.

“

Breakthrough.”

For me, these realizations are irreplaceable experiences, and I will

continue to give my all to improve various aspects of my work.

3

9

TOYOTA Annual Report 2018

Table of Contents

Message from the President

Toward the Mobility Society of the Future

Initiatives for Sustainable Growth

Corporate Data

Initiatives for Sustainable Growth Corporate Philosophy Corporate Governance Messages from the Outside Directors Toyota Environmental Challenge Employees Risk Management Compliance Customer First and Quality First

Respect for Human Rights and SCM Working to Better the World around Us

Risk Management

Sustainability Meeting and ESG Committee

The ESG Committee is responsible for global risk

management. Meeting participants comprehensively

identify risks to business activities, review and report

on major current risk items in order to promote pre-

ventive action. The results of the ESG Committee’s

activities are reported to the Sustainability Meeting,

which provides oversight of related operations.

In addition, the meeting advances special mea-

sures related to information security and business

continuity management (BCM), areas in which the

level of risk corporations face has been growing in

recent years.

Risks related to Toyota’s businesses and other fac-

tors that could signiﬁcantly impact the decisions of

investors are listed in Toyota’s Form 20-F under the

categories Industry and Business Risks; Financial

Market and Economic Risks; and Regulatory, Legal,

Political, and Other Risks.

Business and Other Risks

Fundamental Approach

Organization and Structure

Industry and Business Risks

• The worldwide automotive market is highly competitive

The worldwide automotive industry is highly volatile

•

Toyota has been working to reinforce its risk manage-

ment systems since the series of recall issues in

010. In June 2010, Toyota established the Risk

Management Committee (now the Sustainability

Meeting and ESG Committee) and appointed risk

managers for the global group and each business

division as part of global measures to prevent and

mitigate the impact of risks that could arise in the

course of business activities.

Appointment of Risk Management Personnel

Toyota has appointed a global chief risk ofﬁcer (CRO)

to head global risk management. The global CRO is

charged with handling major risks and coordinating

and directing the response to major emergencies on

a global basis.

Beneath the global CRO are regional CROs

appointed to oversee speciﬁc regions, and each

region has its own risk management structure.

Within the head ofﬁce (accounting, purchasing,

etc.), risk management is assigned by function to

chief ofﬁcers and risk managers, while in each in-

house company, risk management is assigned to the

company president and company risk managers.

Furthermore, the regional head ofﬁces and individual

sections coordinate and cooperate with one another

on risk management.

• Toyota’s future success depends on its ability to offer

new, innovative and competitively priced products that

meet customer demand on a timely basis

2

•

Toyota’s ability to market and distribute effectively is an

integral part of Toyota’s successful sales

•

Toyota’s success is signiﬁcantly impacted by its ability to

maintain and develop its brand image

• Toyota relies on suppliers for the provision of certain sup-

plies, including parts, components, and raw materials

• The worldwide ﬁnancial services industry is highly

competitive

• Toyota’s operations and vehicles rely on various digital

and information technologies

Financial Market and Economic Risks

•

Toyota’s operations are subject to currency and interest

rate ﬂuctuations

• High prices of raw materials and strong pressure on Toyota’s

suppliers could negatively impact Toyota’s proﬁtability

•

A downturn in the ﬁnancial markets could adversely

affect Toyota’s ability to raise capital

Regulatory, Legal, Political, and Other Risks

Risk Management

WEB

(Sustainability Data Book 2018, p. 139)

• The automotive industry is subject to various governmen-

tal regulations

WEB

Form 20-F for the year ended March 31, 2018

•

Toyota may become subject to various legal proceedings

Toyota may be adversely affected by natural calamities, polit-

ical and economic instability, fuel shortages or interruptions

in social infrastructure, wars, terrorism, and labor strikes

Implementation Framework

Shareholders’ Meeting

Information Security Initiatives

In June 2016, Toyota established an Information

Sustainability Meeting

ESG Committee

Cyber attacks are growing more sophisticated and

complex. Their corporate targets have expanded

from conﬁdential information and information sys-

tems to include systems that control plants and

vehicles, such as those for on-board devices.

Information security is thus an increasingly impor-

tant priority for Toyota.

Security Policy that clearly lays out Toyota’s basic

approach to information security and related initia-

tives to facilitate united information security initia-

tives by TMC and its consolidated subsidiaries.

WEB

Information Security Policy

Respective head

ofﬁce sections

Respective

companies

Respective regions

Toyota considers ensuring the safety and peace

of mind of its customers as well as protecting its

customers’ personal information and other assets

to be its social responsibility. Accordingly, we are

advancing a range of initiatives to reinforce infor-

mation security from the perspectives of gover-

nance and risk management.

Key Points of Our Information Security Policy

(Toyota’s Basic Approach)

Regional CROs

Chief Ofﬁcers

Presidents

1

2

. Compliance

. Maintenance of stable business infrastructure

Collaboration

Secretariats for

functions

Companies’ risk

managers

Regional functions

3. Providing safe products and services

4

5

. Contribution to the establishment of safe

cyberspace

. Information security management

4

0

TOYOTA Annual Report 2018

Table of Contents

Message from the President

Toward the Mobility Society of the Future

Initiatives for Sustainable Growth

Corporate Data

Initiatives for Sustainable Growth Corporate Philosophy Corporate Governance Messages from the Outside Directors Toyota Environmental Challenge Employees Risk Management Compliance Customer First and Quality First

Respect for Human Rights and SCM Working to Better the World around Us

Compliance

Results are reported to the Sustainability Meeting and

used as a basis for further improvement. By incorpo-

rating improvement initiatives into each year’s action

plans, we ensure that these checks lead to ongoing

positive action.

Moreover, Toyota holds meetings with subsidiaries

in order to keep track of their compliance efforts and

provide them support as needed.

Fundamental Approach

Organization and Structure

Checks to Enhance Compliance

The Guiding Principles at Toyota state that Toyota

shall “honor the language and spirit of the law of

every nation and undertake open and fair business

activities to be a good corporate citizen of the world.”

Toyota believes that by adhering to this principle in its

actions, it can fulﬁll its corporate social responsibility

and ensure compliance.

In accordance with its basic internal control poli-

cies, Toyota promotes initiatives centered on the con-

struction of frameworks, including the adoption and

enforcement of the Code of Conduct as well as edu-

cation and other means of human resource develop-

ment. Toyota has also established consultation

hotlines; any concerns that are reported to said are

assiduously addressed to ensure that no potential

problem is overlooked.

The Sustainability Meeting discusses the expectations

of stakeholders and responses to various social

issues. In particular, the meeting deliberates on mat-

ters related to corporate governance and compliance.

In ﬁscal 2009, Toyota began implementing internal

checks to enhance its compliance structure. In ﬁscal

2010 these checks were extended to subsidiaries in

and outside Japan. Since then, these checks have

been carried out and improved upon every year.

WEB

Compliance (Sustainability Data Book 2018, p. 143)

Activity Diagram

Implementation Framework

Shareholders’ Meeting

Distribution and

collection of

Within Toyota (HQ)

Subsidiary

Second-tier Subsidiary

inspection sheets

Secretariat and

Self-

inspections

Incorporation

into policy

Self-

inspections

Incorporation

into policy

specialized divisions

Board of Directors

Individual

divisions

P

C

P

Feedback

Sustainability Meeting

Chairman: Chief Risk Ofﬁcer

A

D

A

D

Self-

inspections

Incorporation

into policy

Support for

improvement

(

Executive Vice President)

Toyota Code of Conduct

Frequency: Twice a year

C

The Toyota Code of Conduct (adopted in 1998 and

revised in March 2006) outlines the basic frame of

mind that all Toyota personnel should adopt and sets

forth concrete guidelines to assist them in upholding

the Guiding Principles at Toyota and doing their part

to ensure that Toyota carries out its corporate social

responsibility. A booklet containing the Toyota Code

of Conduct is distributed to all employees to better

enable them to put the code into practice in their own

lives both at work and in the community.

P

Governance, risk management

Self improvement

A

D

C

ESG Committee

Self improvement

Ensuring Compliance

Main Training Themes to Date

To ensure that awareness of compliance extends

from top management all the way to each and

every employee, Toyota conducts training pro-

grams for directors and executives, managers, and

new hires as well as Company-wide e-learning

programs.

Liability Act, and other topics. Around 1,000

employees attended these seminars in ﬁscal 2018.

In addition, based on speciﬁc needs, the Legal

Division conducts on-site seminars on a wide

range of topics at individual divisions.

•

Contracts

• The Product Liability Act

• Bribery prevention

WEB

Toyota Code of Conduct

The Act against

Unjustiﬁable Premiums and • Export operations

Misleading Representations

management

• Subcontracting law

• Copyright

• Intellectual property

(trademarks)

In addition to standard legal topics, such as

labor law, antimonopoly law, and subcontracting

law, we conduct seminars covering bribery preven-

tion, personal information protection, the Product

• Conﬁdentiality management • The Act on the Protection

•

Labor

of Personal Information

• Taxes

Antimonopoly law

Insider trading regulations

• Safety and health

4

1

TOYOTA Annual Report 2018

Table of Contents

Message from the President

Toward the Mobility Society of the Future

Initiatives for Sustainable Growth

Corporate Data

Initiatives for Sustainable Growth Corporate Philosophy Corporate Governance Messages from the Outside Directors Toyota Environmental Challenge Employees Risk Management Compliance Customer First and Quality First

Respect for Human Rights and SCM Working to Better the World around Us

Customer First and Quality First Measures

Initiatives to Improve Quality

Customer First Measures

or accidents. After-sales service provides safety, peace

of mind, and comfort to customers at these times,

supporting the Toyota and Lexus brands.

Fundamental Approach

Toyota sees quality as the combination of product

quality, sales and service quality, and, as the founda-

tion supporting these, the quality of the work per-

formed by each employee.

The essence of Toyota’s principle of Customer First is

providing customers with products and services that

bring smiles to their faces. Toyota aims to provide

cars that achieve superior environmental, safety, and

quality performance without sacriﬁcing driving perfor-

mance or other aspects of the intrinsic appeal of

cars, at an affordable price. We humbly and openly

accept information provided by our dealers and cus-

tomer feedback received at customer assistance

centers, taking such input to heart and utilizing it to

make ever-better cars.

In recent years, the average duration of car use has

been lengthening. In ﬁscal 2018, the average length

of use of passenger vehicles in Japan (excluding

mini-vehicles) was 12.9 years, 1.3 years longer than

a decade earlier. Accordingly, the role of after-sales

service is becoming increasingly important. More

than 100 million Toyota vehicles are currently in use

worldwide, and each one is irreplaceable to a cus-

tomer. Toyota strives to provide ever-better services

in accordance with the 3S Spirit (Seikaku + Shinsetsu

= Shinrai, meaning Accuracy + Caring = Trust) to

ensure that customers will be highly satisﬁed with

their vehicles.

The origins of Toyota’s Customer First and Quality

First principles lie in the Five Main Principles of

Toyoda, which embody the thinking of Sakichi

Toyoda, and the spirit of audit and improvement

espoused by Kiichiro Toyoda. Since its foundation,

Toyota has built a corporate culture that focuses par-

ticular attention on customer-pleasing quality and

continuous Kaizen (improvement) achieved through

Genchi Genbutsu (onsite, hands-on experience). In

accordance with our commitment to quality as stated

in the Toyota Global Vision, each employee in each

ﬁeld maintains a constant and strong awareness of

issues and a sense of ownership, striving to continu-

ously implement Kaizen and collaborating closely with

personnel in other ﬁelds to enhance customer safety,

peace of mind, and satisfaction.

We believe that our products and services can only

gain the conﬁdence of customers when all employees

engaged in every process, from development, pur-

chasing, production, and sales to after-sales service,

build in quality, coordinate with one another across

processes, and implement the quality assurance cycle.

Quality starts with the spirit of audit and improve-

ment. Through continuous improvement based on

repeated implementation of the PDCA cycle, Toyota

pursues ever-higher quality—this is the unchanging

core of Toyota’s manufacturing.

After-sales Services Measures

To bring smiles to the faces of as many customers as

possible, it is essential to realize both better cars and

better services. Customer car use requires regular ser-

vicing, inspections, and repairs following breakdowns

Customer First and Quality First Measures

WEB

(

Sustainability Data Book 2018, p. 20)

Maintaining Focus on the Series of Recall Issues

Training Centers Develop Global Service Engineers

February 24, the anniversary of the day that President Akio Toyoda attended U.S. Congressional hearings held to investigate

the series of recall issues that occurred in 2010, has been designated Toyota Restart Day. We have created mechanisms and

are taking measures to raise awareness in order to keep the lessons learned from the series of recall issues fresh.

The Tajimi Service Center provides training on vehicle servicing technologies and body repair and paint to service technicians

from dealers in Japan and distributors worldwide.

Opened in July 2013, the Tajimi Service Center is fully equipped

classrooms, practice areas, and drive evaluation courses with a

variety of road conditions on a vast 187,000 m site. In ﬁscal

2018, approximately 2,200 staff from 26 locations in Japan and

overseas trained at the center, bringing the center’s cumulative

total number of training alumni to approximately 9,800.

Research and development of new technologies for the ser-

vice, repair, and painting of new vehicles equipped with cutting-

edge technologies is also concentrated at the center. As a

global training facility, the center enables staff who come to the

center for training improve their knowledge and skills, helping

build a solid foundation for reinforcing global competitiveness in

service technology.

Customer Quality Learning Center

Storytelling Activities

In 2014, Toyota established the Customer Quality Learning

Centers to convey the experiences and lessons learned from the

series of recall issues to future generations of employees. With

exhibits that appeal to the ﬁve senses, such as actual examples

of faulty parts and vehicle simulators, these centers serve an

important educational role, especially for new employees who

did not experience the events ﬁrsthand. The content of the cen-

ters is updated every year to cover the most recent quality

issues. Toyota has established approximately 30 Customer

Quality Learning Centers globally (as of March 31, 2018).

Employees who experienced the 2010 series of recall issues take

on the role of storyteller to convey the facts and lessons learned

from those events at their own work sites. The number of

employees who experienced the recall issues ﬁrsthand decreas-

es every year, but it is important to keep the experiences and les-

sons learned alive. To this end, starting in 2017, this initiative was

expanded Company-wide to train the next generation of storytell-

ers and thereby keep the lessons learned from fading.

2

Service Technology Training Process

Region

Country

Regional affiliate/trading company

Distributors under regional affiliate

Europe, Africa, the Caribbean,

Oceania, some Asian countries

Dealers

Distributors in

each country

(

Outside the above regions/countries)

Dealers

(

Japan)

Implementation at the Tajimi Service Center

Implementation by training alumni in each region/country

Tajimi Service Center

4

2

TOYOTA Annual Report 2018

Table of Contents

Message from the President

Toward the Mobility Society of the Future

Initiatives for Sustainable Growth

Corporate Data

Initiatives for Sustainable Growth Corporate Philosophy Corporate Governance Messages from the Outside Directors Toyota Environmental Challenge Employees Risk Management Compliance Customer First and Quality First

Respect for Human Rights and SCM Working to Better the World around Us

Respect for Human Rights and Supply Chain Management

We strive to ensure that these values are put into

practice throughout Toyota’s global business activi-

ties, including at subsidiaries and suppliers.

Respect for Human Rights

Fundamental Approach

Organization

The Guiding Principles at Toyota, Toyota’s CSR poli-

cy, and the Toyota Code of Conduct state that Toyota

shall respect the human rights and other rights of all

people. Moreover, the Toyota Way, based on the

Guiding Principles at Toyota, lays out the values that

all employees working at Toyota should embrace.

The two pillars of the Toyota Way are Continuous

Improvement and Respect for People. Respect for

People entails respect for all stakeholders as well as

respect for the character and abilities of employees

as individuals. It also facilitates self actualization by

linking the personal growth of employees to

We hold Sustainability Meetings to discuss such top-

ics as human rights issues, keeping in mind the

expectations of our stakeholders. These meetings

serve to secure structures that enable the sustainable

growth of both the Company and society by gather-

ing relevant information and strengthening and revis-

ing relevant measures.

Toyota Green Purchasing Guidelines

Toyota purchases a wide range of materials, parts,

and equipment from many different suppliers. We col-

laborate with suppliers to implement environmental

initiatives using the Toyota Green Purchasing

Guidelines.

Collaboration with Suppliers

Initiatives Related to Conﬂict Minerals

Company performance.

Since its establishment, Toyota has worked closely

with its suppliers in its manufacturing businesses.

As part of these efforts, Toyota has globally imple-

mented its Basic Purchasing Policies in accordance

with a spirit of mutual beneﬁt based on mutual trust.

While maintaining close relationships with longstand-

ing and new partners alike, we are promoting initia-

tives in line with our Customer First policy.

In recent years, interest in the social responsibility of

companies, including their supply chains, is increasing.

Toyota will continue to contribute to the sustainability

of society and the earth by working with suppliers to

ensure compliance, promote respect for human rights,

and reduce negative environmental impact.

Toyota has adopted the Policies and Approaches to

Conﬂict Minerals Issues, which it applies as a set of

guidelines when tackling conﬂict mineral-related

issues.

Please see the page below for information about

activities in 2017.

The Toyota Way is a set of shared values for all our

afﬁliates around the world. Referencing each nation’s

laws and customs as well as international guidelines

and norms, such as the Universal Declaration of

Human Rights and the United Nations Guiding

Principles on Business and Human Rights, we pro-

mote a range of activities to ensure that employees

can work with peace of mind and thrive while aiming

always to meet the expectations of our stakeholders.

WEB

Toyota Green Purchasing Guidelines

Example Activities

•

Dialogue with executives of suppliers

Independent efforts by suppliers (CSR lectures,

CSR workshops, volunteering)

Toyota’s Approaches to Conﬂict Minerals Issues

WEB

(Sustainability Data Book 2018, p. 45)

•

Improving awareness and knowledge among all

employees, including buyers, through seminars and

other internal training

Sharing and Applying Policies on Respect for Human Rights

Collaboration with Suppliers (Sustainability Data Book

WEB

Toyota

Subsidiaries

Suppliers

Dealers

2018, p. 49)

Toyota Supplier CSR Guidelines

CSR Policy: Contribution towards

Sustainable Development

Based on the belief that collaboration with suppliers

on CSR issues is important, Toyota established the

Toyota Supplier CSR Guidelines in February 2009.

Toyota suppliers are requested to implement their

own CSR activities based on the guidelines and

develop their own CSR policies and guidelines for

their respective suppliers.

Toyota Supplier

CSR Guidelines

Dealer CSR Guidelines

(Japan)

Improvement requests

to suppliers as

necessary

Consolidated Compliance Program

Self-checks

WEB

Toyota Supplier CSR Guidelines

Training

4

3

TOYOTA Annual Report 2018

Table of Contents

Message from the President

Toward the Mobility Society of the Future

Initiatives for Sustainable Growth

Corporate Data

Initiatives for Sustainable Growth Corporate Philosophy Corporate Governance Messages from the Outside Directors Toyota Environmental Challenge Employees Risk Management Compliance Customer First and Quality First

Respect for Human Rights and SCM Working to Better the World around Us

Working to Better the World around Us

Based on a philosophy of contributing to soci-

The Toyota Mobility Foundation:

Olympic and Paralympic Worldwide

Partnerships

Taking Our Founding Principle of

Social Contribution Global

ety through the manufacture of automobiles,

Toyota endeavors to contribute to sustainable

development.

Supporting Ideas and Initiatives

to Enrich Mobility

In 2015, aiming to use sports to create a peaceful and

inclusive society and to use mobility to contribute to the

realization of a sustainable society, Toyota formed a part-

nership with the International Olympic Committee (IOC)

and International Paralympic Committee (IPC) in the

areas of vehicles, mobility services, and mobility solu-

tions, making it the ﬁrst Worldwide Olympic and

Toyota has a long history of social contribution that

traces back to the desire of Sakichi Toyoda—the

father of Toyota Motor Corporation’s founder, Kiichiro

Toyoda—to support inventions that would enrich

people’s lives. Kiichiro and his team, who together

built Toyota’s automotive business, kept this spirit of

social contribution alive after Sakichi’s death, espous-

ing the concepts of contributing to the development

and welfare of the country and remembering to

always be grateful. These concepts were eventually

woven into the Five Main Principles of Toyoda, the

Guiding Principles at Toyota, and the Toyota Global

Vision. In these various forms, this spirit of social

contribution has been handed down to today.

Toyota seeks to make ever-better cars in

order to bring happiness to customers. At the

same time, Toyota implements a wide range of

activities, such as fostering initiatives related to

mobility through the Toyota Mobility Foundation,

sponsoring sporting events—including the

Olympic Games, Paralympic Games and Special

Olympics—and promoting social contribution

activities. All of these efforts are aimed at

realizing the mobility society of the future and

richer lifestyles.

Established by Toyota in August 2014, the Toyota

Mobility Foundation (TMF) aims to enable more peo-

ple to go more places by sharing TMF knowledge,

partnering with others, and innovating to build a more

joyful mobile society.

Currently, TMF’s global initiatives support diversifying

transportation in Thailand, Vietnam, India and Brazil and

providing better freedom of mobility in remote mountain-

ous communities in Japan(Photo ꢀ). Additionally, TMF

Paralympic Partner in the mobility category.

Through the Olympic and Paralympic Games, Toyota

is aiming to achieve the following goals: “Ever Better

MOBILITY FOR ALL,” “Ever Better SOCIETY” and

is conducting a challenge prize competition to incorpo-

rate smart technology into mobility devices for people

with lower-limb paralysis. Finally, TMF’s research efforts

include a breadth of mobility topics from hydrogen to

trafﬁc ﬂow optimization using artiﬁcial intelligence.

Going forward, in addition to improving existing ini-

tiatives, TMF plans to expand them to other cities

facing similar mobility challenges. Alongside their

partners, TMF plans to leverage insights gained from

current projects to advance future initiatives to help

solve mobility issues around the world.

“Ever Better TOYOTA.” Toyota is carrying out initia-

Toyota will continue to contribute to the real-

ization of a prosperous mobility society with

greater happiness for all.

tives in the areas of mobility, sports, and social

issues, aiming to realize a society in which everyone

can participate and strive.

In addition to contributions made through its busi-

nesses, Toyota is pursuing social contribution in three

designated global priority ﬁelds: the environment

(Photo ꢁ), trafﬁc safety, and education. We are also

At the Tokyo 2020 Games, Toyota aims to provide

mobility solutions that go beyond its conventional

framework of supplying vehicles based on three pil-

lars: 1. Mobility for all, 2. Sustainability centered on

the realization of a hydrogen-powered society (envi-

ronment and safety), and 3. Transportation support

leveraging the Toyota Production System for those

involved in the games.

promoting activities in social, cultural, and other ﬁelds

to meet the social needs of speciﬁc countries and

regions, utilizing our technologies, expertise, and

other resources to proactively advance initiatives.

Going forward, Toyota will continue striving to sup-

port volunteering and to sustain automotive and

manufacturing cultures.

WEB

Toyota Mobility Foundation

Themes of the Toyota Mobility Foundation’s Initiatives

WEB

Olympic Games, Paralympic Games and

Motorization/

Public Transport

Theme

Special Olympics (Sustainability Data Book 2018, p. 34)

WEB

Social Contribution Activities

Developed

countries

Personal Mobility

Vulnerable populations

such as people with disabilities,

senior citizens, and others

Disaster

response

Energy

(hydrogen

Maturation

Harmony in Mobility

supply chain)

Traffic flow optimization

Diversification of transportation

Improving overall

PARK&

RIDE

convenience

Reducing social costs

(congestion, pollution,

accidents)

Emerging

countries

CO

2

ꢀ

Providing mobility in remote mountainous communities

ꢁ Forest of Toyota hands-on nature program

4

TOYOTA Annual Report 2018

Table of Contents

Message from the President

Toward the Mobility Society of the Future

Initiatives for Sustainable Growth

Corporate Data

Initiatives for Sustainable Growth Corporate Philosophy Corporate Governance Messages from the Outside Directors Toyota Environmental Challenge Employees Risk Management Compliance Customer First and Quality First

Respect for Human Rights and SCM Working to Better the World around Us

Working to Better the World around Us

Harnessing Ideas from around

the World for Innovative Assistive

Mobility Devices for People with

Lower-limb Paralysis

In November 2017, the Toyota Mobility Foundation

launched the Mobility Unlimited Challenge. Working in

1

2

partnership with Nesta’s* Challenge Prize Centre,*

“

Team Morii”

a UK-based non-proﬁt organization, the Mobility

Unlimited Challenge uses a competition format to

(YouTube, Japanese with English Subtitles, 12:35)

develop assistive devices that improve the mobility and

independence of people with lower-limb paralysis. The

Challenge asks innovators around the world to incor-

porate smart technologies into their devices and

requires co-creation with end-users to ensure the

devices address their needs. Five teams will be select-

ed as ﬁnalists in early 2019, and the winning team will

be announced in the summer of 2020.

Developing a More Advanced Sit-Ski with a World-Class Athlete

Toyota supported more than 50 athletes from about 20 countries, including ﬁve

Toyota employee athletes, at the Olympic and Paralympic Winter Games

PyeongChang 2018 in South Korea. Together, these athletes comprised

to involve tens of employees, who formed “Team Morii.” Working toward ideal

performance at speeds of more than 100 km/h, Team Morii created a sit-ski that

is 15% lighter than and three times as rigid as Morii’s previous model. Team mem-

bers were inspired by the uncompromising striving of the world-class athlete,

commenting that the experience helped them step up the mindset they bring to

making cars.

*

1 Nesta: An innovation foundation that backs new ideas to

tackle the big challenges of our time. It is a UK charity that

works all over the world. To ﬁnd out more visit www.nesta.

org.uk

“Team Toyota.”

“Team Toyota” included 25 athletes from 12 countries who competed in the

PyeongChang 2018 Paralympic Winter Games. One of these was Para alpine

skier Taiki Morii. A world-class athlete, Morii was already a four-time veteran of

the Paralympic Winter Games, with a total of four medals from three of the

Games. Looking for new challenges, he came to work at Toyota in 2014.

There, Toyota’s desire to use its technological capabilities honed by making

cars and other products to develop better sporting equipment aligned with Morii’s

drive to take home the gold. In July 2015, with sights set on PyeongChang 2018,

Toyota began the joint development of a new sit-ski, working with Morii and

wheelchair manufacturer Nissin Medical Industries Co., Ltd. Toyota handled the

design of the sit-ski frame and link mechanism, which move in a way similar to a

car suspension, as well as experiments aimed at reducing air resistance.

Beginning with just a handful of individuals, by the end, the endeavor had grown

*

2 Challenge Prize Centre: A body within Nesta that utilizes

challenge prizes to stimulate and speed up problem-solving

activity on some of the most difﬁcult challenges we face in

society.

Based on a commitment to support the creation of a more inclusive and sus-

tainable society in which everyone can challenge their impossible in order to

improve the lives of its customers and society as a whole, Toyota is promoting

its “Start Your Impossible” global corporate campaign. The spirit of the Olympics

and Paralympics, representing the tireless pushing of limits and coming together

across national borders, has much in common with Toyota’s corporate culture

of Kaizen (improvement) and respect for people. We want movement to present

not an impediment, but the possibility of fulﬁlling dreams. Based on this desire,

we will continue working to provide a wide range of mobility solutions.

Mobility Unlimited

Challenge Launch Film

(

YouTube, 1:58)

Mobility Unlimited

Challenge

WEB

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5

TOYOTA Annual Report 2018

Table of Contents

Message from the President

Toward the Mobility Society of the Future

Initiatives for Sustainable Growth

Corporate Data

Corporate Data At a Glance History Financial Summary Non-Automotive Business Corporate/Stock Information

At a Glance

Number of Plants and

Distributors*

R&D Sites*

Number of Employees

Global Perspective/Data by Region

Manufacturing Companies*

(

As of March 31, 2018)

(As of March 31, 2018)

(

As of March 31, 2018)

369,124

*Number of bases for Toyota and Lexus brands

(

Consolidated, as of March 31, 2018)

Other

Asia

North

America

Europe

Japan

North

America

Asia

excluding Japan

10

5

Japan

17

—

6

8

9

3

2

4

1

4

2

Total Vehicle Production

3

Other

8

,964,133

(

Consolidated, FY 2018)

8

114

0

Total Vehicle Sales

Net Revenues

Operating Income

Net Income

Total Vehicle Sales

Financial Highlights

for the Year Ended

March 31, 2018

8,964,394

8

,964 thousand

¥29,379.5 billion

¥2,399.8 billion

¥2,493.9 billion

+36.2

%

(Consolidated, FY 2018)

-

7

thousand

+6.5

%

+20.3

%

(Consolidated)

The second of each pair of

ﬁgures is the year-on-year

change.

Total Liquid Assets (net)

Total Shareholder Return (max)

R&D Expenses

Capital Expenditures

¥

8,025.9 billion

¥1,200.1 billion

+¥117.7 billion

¥1,064.2 billion

+¥26.7 billion

¥1,302.7 billion

+¥90.9 billion

+

¥262.9 billion

4

6

TOYOTA Annual Report 2018

Table of Contents

Message from the President

Toward the Mobility Society of the Future

Initiatives for Sustainable Growth

Corporate Data

Corporate Data At a Glance History Financial Summary Non-Automotive Business Corporate/Stock Information

History

Founding and entry

Establishing

Leaping forward as

a global corporation

Toward the mobility

society of the future

into the automobile

the Toyota identity

industry

Domestic/Overseas Vehicle Production (Thousands of units)

(

Including Daihatsu and Hino brands since 2002)

ꢀ

Domestic ꢀ Overseas

Toyopet Crown launched

1955)

Corolla launched

(1966)

Celica launched

(1970)

Soarer launched

(1981)

Lexus LS400 launched

(1989)

Prius launched (1997)

MIRAI launched (2014)

Toyoda Model AA passenger

car launched (1936)

(

ꢁ

Labor disputes (1950)

ꢁ Toyota Motor and Toyota Motor Sales merged

with TMC (1982)

ꢁ Recall issues (2009–2010)

ꢁ TRI established (2016)

ꢁ

Toyota Motor Co., Ltd. established (1937)

ꢁ Total Quality Control (TQC) introduced (1961)

ꢁ Kanban method adopted (1963)

ꢁ Losses (FY 2009)

History of

Toyota

ꢁ

Toyoda Model AA passenger car launched (1936)

ꢁ NUMMI, a joint corporation

with GM, established in

the U.S. (1984)

ꢁ Prius launched (1997)

ꢁ MIRAI launched (2014)

ꢁ The Toyota Way 2001 adopted (2001)

ꢁ

Toyota Environmental Challenge 2050

established (2015)

ꢁ

Five Main Principles of Toyoda

established (1935)

ꢁ The Toyota Production System established

ꢁ

Guiding Principles at Toyota adopted (1992)

ꢁ Toyota Global Vision adopted (2011)

ꢁ

Berlin Wall comes down (1989)

ꢁ The Great East Japan Earthquake,

ꢁ

Rapid economic growth period

in Japan (1960s-1970s)

Thailand ﬂoods (2011)

Major

World

Events

ꢁ U.S.-Japan trade friction (1980s) ꢁ The 2008 ﬁnancial crisis (2008)

ꢁ Oil crisis (1973 & 1979) ꢁ Rio Earth Summit (1992)

ꢁ Trade friction surrounding cars (1990s)

ꢁ Kyoto Protocol adopted (1997)

ꢁ

World War II (1939-1945)

ꢁ

UN SDGs adopted (2015)

ꢁ Paris Agreement adopted

2015)

(

ꢁ

Tighter control on exhaust emissions (1970s)

WEB

75 Years of Toyota

4

7

TOYOTA Annual Report 2018

Table of Contents

Message from the President

Toward the Mobility Society of the Future

Initiatives for Sustainable Growth

Corporate Data

Corporate Data At a Glance History Financial Summary Non-Automotive Business Corporate/Stock Information

Financial Summary (Consolidated)

<

U.S. GAAP>

Fiscal years ended March 31

2009

2010

2011

2012

2013

2014

2015

2016

2017

8,971

108

2018

Consolidated Vehicle Sales

Foreign

(thousands of units)

7,567

7,237

7,308

7,352

8,871

9,116

8,972

8,681

8,964

Yen to US Dollar Rate

101

144

93

131

86

113

79

109

83

107

100

134

110

139

120

133

111

130

Exchange

Rates

Yen to Euro Rate

119

(Average)

Net Revenues

(billions of yen)

(yen)

20,529.5

(461.0)

(560.4)

(437.0)

313.5

100

18,950.9

147.5

291.4

209.4

141.1

45

18,993.6

468.2

563.2

408.1

156.8

50

18,583.6

355.6

432.8

283.5

157.7

50

22,064.1

1,320.8

1,403.6

962.1

285.0

90

25,691.9

2,292.1

2,441.0

1,823.1

522.9

27,234.5

2,750.5

2,892.8

2,173.3

631.3

28,403.1

2,853.9

2,983.3

2,312.6

645.5

27,597.1

1,994.3

2,193.8

1,831.1

627.5

210

29,379.5

2,399.8

2,620.4

2,493.9

642.6

Operating Income (Loss)

Income (Loss) before Income Taxes

Net Income (Loss)

(Note 1)

Common

Shares

Cash Dividends

Cash Dividends per Share

165

200

210

220

Payout Ratio

(%)

—

67.4

38.4

55.6

29.6

28.7

29.0

28.3

34.6

26.1

Value of Shares Repurchased

549.9

(maximum)

(billions of yen)

—

180.0

293.3

639.3

449.9

[shareholder return]

(Note 2)

R&D Expenses

(billions of yen)

(%)

904.0

1,072.1

1,302.5

3,324.1

29,062.0

10,061.2

(4.0)

725.3

1,032.0

579.0

730.3

812.3

779.8

732.9

807.4

727.3

910.5

775.9

1,004.5

806.2

1,055.6

885.1

1,037.5

893.2

1,064.2

964.4

Depreciation Expenses

Capital Expenditures

Total Liquid Assets

Total Assets

(Note 3)

(Note 4)

642.3

706.7

852.7

1,000.7

7,661.9

41,437.4

14,469.1

13.7

1,177.4

8,508.2

47,729.8

16,788.1

13.9

1,292.5

9,229.9

47,427.5

16,746.9

13.8

1,211.8

9,199.5

48,750.1

17,514.8

10.6

1,302.7

9,372.1

50,308.2

18,735.9

13.7

4,656.3

30,349.2

10,359.7

2.1

4,943.4

29,818.1

10,332.3

3.9

4,968.1

30,650.9

10,550.2

2.7

5,883.1

35,483.3

12,148.0

8.5

Toyota Motor Corporation Shareholders’ Equity

Return on Equity

Return on Asset

(%)

(1.4)

0.7

1.4

0.9

2.9

4.7

4.9

3.8

5.0

(

Note 1) Shows “Net income (loss) attributable to Toyota Motor Corporation”

Note 2) Value of common shares repurchased (shareholder return on Net Income for the period, excluding shares constituting less than one unit that were purchased upon request and repurchases made to avoid dilution of shares)

Note 3) Figures for depreciation expenses and capital expenditures do not include vehicles in operating lease

Note 4) Excludes ﬁnancial subsidiaries

WEB

SEC Filing

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8

TOYOTA Annual Report 2018

Table of Contents

Message from the President

Toward the Mobility Society of the Future

Initiatives for Sustainable Growth

Corporate Data

Corporate Data At a Glance History Financial Summary Non-Automotive Business Corporate/Stock Information

Financial Summary (Consolidated)

<

U.S. GAAP>

Consolidated Vehicle Sales

Net Revenues

Operating Income

˾

˾ Operating income bb Operating income ratio (Right scale)

(

Thousands of units)

(Billions of yen)

30,000

(Billions of yen)

3,000

（%）

10,000

12.0

29,379.5

28,403.1

2,853.9

10.0

9,116

27,234.5

27,597.1

2,750.5

8,972

8,971

8,964

8,681

25,691.9

2

5,000

0,000

2,500

10.0

8

6

4

2

,000

0

2,399.8

2,292.1

10.1

8.9

2,000

1,500

1,000

500

1,994.3

8.2 8.0

7

.2

1

5,000

0,000

6.0

4.0

2.0

0

5,000

0

FY

2014

2015

2016

2017

2018

FY

2014

2015

2016

2017

2018

FY

2014

2015

2016

2017

2018

Net Income

R&D Expenses

Capital Expenditures

˾˾ Net income bb Net income ratio (Right scale)

˾˾ R&D expenses bb Ratio to net revenues (Right scale)

˾˾ Capital expenditures ˾˾ Depreciation expenses

(

Billions of yen)

（

%

）

(Billions of yen)

1,200

（

%

）

(Billions of yen)

1,500

2

1

,500

,000

,500

,000

2,493.9

10.0

8.0

6.0

4.0

2.0

0

6.0

5.0

4.0

3.0

2.0

1.0

0

2,312.6

1

,064.2

1,055.6

2

,173.3

1,037.5

1,292.5

1,302.7

8

.5

1,000

800

1,004.5

1,250

1,211.8

8.1

1,177.4

9

10.5

8

.0

1,823.1

1,831.1

7.1

1,000

750

500

250

0

1,000.7

6

.6

3

.6

3

.7

3.7

3.8

964.4

3.5

6

4

2

00

0

893.2

885.1

806.2

7

75.9

500

0

FY

2014

2015

2016

2017

2018

FY

2014

2015

2016

2017

2018

FY

2014

2015

2016

2017

2018

4

9

TOYOTA Annual Report 2018

Table of Contents

Message from the President

Toward the Mobility Society of the Future

Initiatives for Sustainable Growth

Corporate Data

Corporate Data At a Glance History Financial Summary Non-Automotive Business Corporate/Stock Information

Non-Automotive Businesses

Financial Services

Housing Services

Toyota Financial Services Corporation provides ﬁnan-

cial services, mainly auto loans and leasing, to more

than 26,000,000 customers across its network,

which spans more than 35 countries and regions. In

ﬁscal 2017, the ﬁnancial services business recorded

net revenues of ¥2,017.0 billion and operating

income of ¥285.5 billion.

Toyota’s ﬁnancial services center mainly on sales

ﬁnancing, which serves as a tool to promote car

sales. At the same time, we are working in new busi-

ness areas to realize a better future mobility society.

The basic role of the ﬁnancial services business is

to enable more customers to use our cars. We do

our utmost to fulﬁll that role by promoting digitization,

developing and offering new ﬁnancial products, and

expanding our network to countries where the auto-

motive market is growing. For example, in ﬁscal

Furthermore, with the automotive industry undergo-

Toyota Housing Corporation operates a range of

housing-related businesses, including detached

house construction as well as condominium develop-

ment and housing renovations. Under the brand

vision “Sincerely for You,” we strive to deliver peace

of mind during construction, after construction, and

through support in order to help customers realize

their ideal lifestyles. The mainstay detached house

construction business has a sales area covering 29

of Japan’s prefectures, with three factories across the

country. In ﬁscal 2017, the housing services business

sold 16,222 units on a consolidated basis and gener-

ated net revenues of ¥547.9 billion.

In response to the popularization of net zero ener-

gy houses (ZEH), we are adopting various solutions

that meet ZEH thermal insulation speciﬁcations as

standard features. Moreover, we have recently

received recognition under the Good Design Award.

As these examples show, we are providing housing

that realizes high quality in terms both of basic

performance and design. At the same time, the

KenBiKenJu Laboratory, a next-generation housing

research facility that brings together technologies

from across the Toyota Group, is researching new

services that leverage IoT and AI and developing

advanced technologies to create housing that meets

the needs of working women and enable seniors to

enjoy rich, active lives.

In 2017, Toyota Housing made Misawa Homes

Co., Ltd. a consolidated subsidiary. Working together

in such areas as condominium marketing, the two

companies are actively building a solid track record.

Going forward, we will continue to realize synergies in

a range of ﬁelds, such as community development

and overseas businesses, working to accelerate the

progress of both companies’ growth strategies and

provide customers with better products and services.

ing major changes, we are implementing initiatives to

improve customers’ lifestyles and the convenience of

society as a whole by expanding our value chain to

create added value through ﬁnancial services across

the car life cycle, from manufacture to disposal.

In addition, to help customers realize the joy and

freedom of movement through ﬁnancial services, we

are partnering with such ridesharing companies as

Uber Technologies, Inc. and Grab Holdings Inc. and

working to apply the big data provided by cars in the

telematics car insurance business.

Going forward, we will continue to develop and

provide ﬁnancial services in line with customer needs

and local market characteristics to help enrich cus-

tomers’ lives.

WEB

2

017, we established and began sales at a ﬁnancial

Toyota Financial Services Corporation

services company in Ireland.

WEB

Toyota Housing Corporation (Japanese language only)

A Network Spanning More Than 35 Countries and Regions

Net Zero Energy House (ZEH)

ꢂ Insulating exterior walls, roofs, and floors

Insulate

ꢃ Insulating windows and doors

Toyota

Smart

Center

ꢄ Smart Airs

Reduce ꢅ High-efficiency AC units

ꢇ Pure 24 Central

ꢈ LED lighting

ꢆ High-efficiency water heater ꢉ HeMS Pro

ꢀ

ꢁ

Solar power

ENE-FARM type 5 generator

Generate

Sensor-

Smartphone

enabled power

Power

company

distribution

board

Tablet

5

0

TOYOTA Annual Report 2018

Table of Contents

Message from the President

Toward the Mobility Society of the Future

Initiatives for Sustainable Growth

Corporate Data

Corporate Data At a Glance History Financial Summary Non-Automotive Business Corporate/Stock Information

Corporate Information and Stock Information (As of March 31 2018)

Corporate Data

Company Name

Established

Common Stock

Fiscal Year-End

Public Accounting Firm

Number of Afﬁliates

Major Shareholders (Top 10)

Toyota Motor Corporation

August 28, 1937

¥635.4 billion

March 31

PricewaterhouseCoopers Aarata LLC

Consolidated subsidiaries: 606

Afﬁliates accounted for by the equity method: 57

369,124 (Parent company: 74,890)

Corporate information: http://www.toyota-global.com

IR information: http://www.toyota-global.com/investors

First series

Common Model AA class Percentage of

shares shares Total Shareholding

(1,000 shares) (1,000 shares) (1,000 shares) (%)

Name

Japan Trustee Service Bank, Ltd.

Toyota Industries Corporation

The Master Trust Bank of Japan, Ltd.

381,087

232,037

172,408

180

—

381,267

232,037

172,408

12.89

7.85

5.83

—

State Street Bank and Trust Company (Standing Proxy:

Settlement & Cleaning Services Division, Mizuho Bank, Ltd.)

Number of Employees

Corporate Website

1

19,497

—

119,497

4.04

Nippon Life Insurance Company

DENSO Corporation

110,834

89,784

560

—

111,394

89,784

3.77

3.04

Stock Data

Number of Shares Authorized

Number of Shares Issued

JP Morgan Chase Bank, N.A.

(

Standing Proxy: Settlement & Cleaning Services Division,

77,287

—

77,287

2.61

10,000,000,000 shares

Common shares: 3,262,997,492 shares

First series Model AA class shares: 47,100,000 shares

353,073,500 shares

632,418

100 shares

Mizuho Bank, Ltd.)

Mitsui Sumitomo Insurance Company, Limited

Trust & Custody Services Bank, Ltd.

Tokio Marine & Nichido Fire Insurance Co., Ltd.

58,811

58,234

51,045

—

58,811

58,234

51,045

1.99

1.97

1.73

Number of Treasury Stock

Number of Shareholders

Number of Shares per Trading Unit

Stock Listings

Note: The percentage of shareholding is calculated after deducting the number of shares of treasury stock (353,073 thousand shares) from the total

number of shares issued.

Japan: Tokyo, Nagoya

Overseas: New York, London

Japan: 7203

Securities Code

American Depositary Receipts (ADRs) Ratio: 1 ADR=2 Common Stock

Symbol: TM

Transfer Agent in Japan

Mitsubishi UFJ Trust and Banking Corporation

-1, Nikko-cho, Fuchu City, Tokyo 183-0044, Japan

Japan toll-free: (0120) 232-711

Depository and Transfer Agent for ADRs The Bank of New York Mellon

1

Ownership Breakdown

2

40 Greenwich Street, New York, NY 10286, U.S.A.

Financial institutions,

brokerages:

Individuals, etc.

Tel: +1 (0) 201-680-6825

U.S. toll-free: (888) 269-2377, (888) BNY-ADRS

Depositary Receipt: http://www.adrbnymellon.com

Transfer Agent: https://www-us.computershare.com/investor

(including treasury stock):

1,125,334 thousand shares

7

61,620 thousand shares

(34.00%)

(23.00%)

Contact Points for Investors

Japan Toyota City Head Ofﬁce: 1, Toyota-cho, Toyota City, Aichi Prefecture 471-8571, Japan

Tel: (0565) 28-2121 Fax: (0565) 23-5721

Other corporate entities:

93,984 thousand shares

6

Tokyo Head Ofﬁce: 1-4-18, Koraku, Bunkyo-ku, Tokyo 112-8701, Japan

Tel: (03) 3817-7111 Fax: (03) 3817-9092

Foreign corporate entities

and others:

(

20.97%)

U.S.A. Toyota Motor North America, Inc.

729,158 thousand shares

6565 Headquarters Drive, Plano, TX 75024, U.S.A.

(22.03%)

Tel: +1 (0) 469-292-4000 [email protected]

Toyota Motor Europe, London Ofﬁce

U.K.

Note: Ratio indicates the share of ownership to the total number of shares issued.

Second Floor, Caroline House, 55-57 High Holborn, London WC1V 6DX, U.K.

Tel: +44 (0) 207-290-8500 [email protected]

51

TOYOTA Annual Report 2018

Table of Contents

Message from the President

Toward the Mobility Society of the Future

Initiatives for Sustainable Growth

Corporate Data

Toyota is a Worldwide Olympic/Paralympic Partner in the category of vehicles, mobility ser-

vices and mobility solutions.

Cautionary Statement with Respect to Forward-Looking Statements

This report contains forward-looking statements that reﬂect Toyota’s plans and expectations.

These forward-looking statements are not guarantees of future performance and involve known

and unknown risks, uncertainties and other factors that may cause Toyota’s actual results, per-

formance, achievements or ﬁnancial position to be materially different from any future results, per-

formance, achievements or ﬁnancial position expressed or implied by these forward-looking

statements. These factors include, but are not limited to: (i) changes in economic conditions,

market demand, and the competitive environment affecting the automotive markets in Japan,

North America, Europe, Asia and other markets in which Toyota operates; (ii) ﬂuctuations in cur-

rency exchange rates, particularly with respect to the value of the Japanese yen, the U.S. dollar,

the euro, the Australian dollar, the Russian ruble, the Canadian dollar and the British pound, and

interest rates ﬂuctuations; (iii) changes in funding environment in ﬁnancial markets and increased

competition in the ﬁnancial services industry; (iv) Toyota’s ability to market and distribute effectively;

(v) Toyota’s ability to realize production efﬁciencies and to implement capital expenditures at the

levels and times planned by management; (vi) changes in the laws, regulations and government

policies in the markets in which Toyota operates that affect Toyota’s automotive operations, par-

ticularly laws, regulations and government policies relating to vehicle safety including remedial

measures such as recalls, trade, environmental protection, vehicle emissions and vehicle fuel

economy, as well as changes in laws, regulations and government policies that affect Toyota’s

other operations, including the outcome of current and future litigation and other legal proceed-

ings, government proceedings and investigations; (vii) political and economic instability in the

markets in which Toyota operates; (viii) Toyota’s ability to timely develop and achieve market

acceptance of new products that meet customer demand; (ix) any damage to Toyota’s brand

image; (x) Toyota’s reliance on various suppliers for the provision of supplies; (xi) increases in

prices of raw materials; (xii) Toyota’s reliance on various digital and information technologies;

(xiii) fuel shortages or interruptions in electricity, transportation systems, labor strikes, work stop-

pages or other interruptions to, or difﬁculties in, the employment of labor in the major markets

where Toyota purchases materials, components and supplies for the production of its products

or where its products are produced, distributed or sold; and (xiv) the impact of natural calamities

including the negative effect on Toyota’s vehicle production and sales.

A discussion of these and other factors which may affect Toyota’s actual results, performance,

achievements or ﬁnancial position is contained in Toyota’s annual report on Form 20-F, which is

on ﬁle with the United States Securities and Exchange Commission.

WEB

SEC Filling

5

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TOYOTA Annual Report 2018